# BSD Overview

## The Bitcoin Synthetic Dollar

The Bitcoin Synthetic Dollar (BSD or "Based Dollar") is a digital dollar backed by Bitcoin. With BSD you can lock your Bitcoin as collateral and lend yourself dollars. BSD is not issued by a bank and does not run on bank rails so nobody can freeze, inflate, or confiscate your dollars. BSD represents a Bitcoin based future without compromise: Hold your Bitcoin forever and spend dollars today. 

The protocol follows an over-collateralized lending model, similar to [Maker](https://makerdao.com/en/), [Liquity](https://www.liquity.org/), and historic gold-backed currencies. It runs on the Stacks blockchain and uses sBTC for programmable Bitcoin collateral. 

This design unlocks superpowers for Bitcoin holders:

* **Bitcoin Liquidity:** Hold your Bitcoin forever AND spend dollars today.
* **Bankless Lending:** Infinite term, high collateral ratio, borrower set interest rate, no diligence.
* **Security:** Deposit pure Bitcoin. Collateral secured by Stacks miners.
* **Decentralized:** No counter parties. No rehypothication. No bankruptcy risk.
* **Simplicity:** Bitcoin only collateral. No DAO. No farming. No bullshit.

## How BSD works

### **Borrowing**

You lock your sBTC in a vault and mint BSD. You can borrow up to a 110% collateral-to-debt ratio. This loan has no fixed term; it can stay open forever as long as you manage your collateral. 

### **Liquidations**

If your vault's collateralization ratio falls below the minimum of 110%, it will be liquidated.

* The Stability Pool—a reserve of BSD deposited by other users—repays your debt.
* In exchange, your sBTC collateral is transferred to those Stability Providers.
* You keep the BSD you originally borrowed, but you lose your collateral. Given the \~110% collateral level at liquidation, your net loss is minimal in immediate dollar terms.

### **Redemptions & The Peg**

BSD maintains a soft peg to the dollar through a redemption mechanism.

* If BSD trades below $1, it's profitable for anyone to buy cheap BSD and redeem it for $1 worth of sBTC. This reduces the BSD supply and pushes the price back up. Redemptions always target the vaults with the lowest interest rates first.
* If BSD trades above $1, it's profitable to borrow BSD against your Bitcoin and sell it. This increases the BSD supply and pushes the price back down.

This constant arbitrage creates a price floor and ceiling, keeping BSD pegged to the dollar without relying on a central party. 

### **Why choose BSD**

* **Retain Your Stack:** You get the dollars you need today while keeping your original Bitcoin collateral. You maintain exposure to both assets, capturing all the upside of your BTC.
* **True Decentralization**: Your Bitcoin collateral is locked in Stacks smart contracts and secured by a decentralized network of validators, not held by a centralized custodian.
* **Perpetual Credit Line**: The protocol functions as a flexible credit line, allowing you to borrow and repay without fixed terms or extension penalties.
* **Superior Capital Efficiency**: BSD offers high efficiency with a loan-to-value (LTV) of up to \~91%, which is significantly higher than most alternatives.
* **You Set the Terms**: With user-set variable interest rates, you have direct control over your borrowing costs and your risk of being redeemed.
* **Zero Intrinsic Cost**: Because BSD is minted directly against sBTC collateral, there is zero intrinsic cost of capital, allowing for fundamentally lower borrowing rates.