Author: 0xjerome Source: X, @jerome_wong99

Preface: A confession of a founder

Yesterday, the official account of @cityprotocolHQ posted a tutorial on "Double-digit Returns in Bear Market".

That article is more like a knowledge framework - what is Delta, why funding rates can become earnings, why liquidity providers (LPs) don't just charge fees, and so on.

Later, I thought about it and felt that this matter should not just stop at "teaching". I want to write it again from the perspective of the founder and a little confessional way. If you like it, I will update more similar content on my Twitter and channel (t.me/city_protocol)

It’s not about making a bunch of terms more complicated. On the contrary, it’s because I feel more and more strongly: If ordinary users still only understand the crypto market in terms of “up or not”, our industry will always be able to revolve around the emotional cycle.

I did not look at returns from a DeFi perspective from the beginning. In the investment banking departments of HSBC and UBS, I have seen how investment banking, assets, financing, risk pricing and institutional processes work.

Later I entered Web3, and I participated in the founding of EVG and did many things between ecological construction, project incubation, primary market and secondary market. I have also been involved with institutional digital asset platforms like Aspen Digital. It has the traditional long-term capital and family office context behind it, as well as the perspective of the Rothschild family-related capital involvement.

That kind of perspective is very different from ordinary encrypted Twitter.

It doesn’t just ask “Can this thing go up?”

It asks: Where are the assets? Who hosts it? What are the sources of income? How to redeem? How to price risk? If something goes wrong in the market, who is responsible for dealing with it?

Later, I also worked as an LP on several quantitative strategies. This experience had a great impact on me, because when you really put money into a strategy, you will find that what you care about becomes very specific.

You no longer just look at annualized yield (APY). You will start to ask: Does this income depend on the direction of betting? Is it through leverage? Does it depend on the market? Under what circumstances does the maximum drawdown occur? How to calculate net worth (NAV)? Who has authority? When can I withdraw?

These questions don't sound sexy enough. But they are the real concerns of capital. From EVG, Aspen Digital, LP experience in different quantitative strategies, to now working on City Protocol, I increasingly believe in a very simple judgment:

The financial infrastructure that can really stay is not to help users make gambling more exciting, but to help users more clearly understand what risks they are taking and what compensation they are receiving.

This is why I wanted to write this article. Because a bear market will force everyone to be honest.

In a bull market, rising prices will cover up many problems. Many people will not seriously ask whether a product has real cash flow, whether a profit is sustainable, whether a strategy has risk control, and whether a vault has a clear net value (NAV) and redemption mechanism.

But bear markets are different. Bears condense all their beautiful words into a few very direct questions:

First, where do I put my money?

Second, where do the profits come from?

Third, is this annualized rate of return market reward, risk compensation, or someone else’s subsidy?

Fourth, if prices continue to fall, who is protecting the principal?

Fifth, if I want to withdraw, what is the redemption path?

Finally, if there is a problem with the policy, can the system be paused, checked, and repaired?

These questions are simple, but they are the underlying issues of financial products.

City Protocol’s vision essentially revolves around these issues.

We want to bring real-world returns, institutional-level strategies, treasury structures, exchanges, rewards and more complete new financial experiences to the on-chain track, so that users can not just "buy a coin", but be able to discover, understand, participate in and exit more mature financial products on the chain.

That sounds huge. But if it falls on an ordinary user, it actually means the same thing:

Let him understand the basic structure of an income product without becoming a quantitative trader.

Let him ask the right questions without having to believe in "high returns."

Allow him to participate through a more transparent infrastructure without having to manually manage funding rates, hedging, equity, oracles, redemption windows and strategy whitelists.

So this article is not a call for orders, nor is it a package of a certain strategy. It's more like a map I want to leave to the user.

If after reading this, the next time you see 15%, 20%, or 30% annualized returns, you no longer just ask "can you hedge it?" but first ask "where does the income come from, where are the risks, who is managing, how to verify, and how to exit", then it will make sense.

This is why, as the founder of City Protocol, I feel I should write this article.

Not because I want to appear to know a lot of jargon. It’s because I really feel that the next stage of crypto user education must evolve from “teaching everyone to chase the ups and downs” to “teaching everyone to understand cash flow and risk structure.”

I want to write this article to three types of people.

The first category is those who made money in the bull market and then vomited it back in the bear market.

The second category is those who have made good results in the bull market, but do not know how to continue to obtain stable profits in the bear market.

The first category is people who already know that "buying spot and waiting to pull the market" is not a long-term strategy, but have not yet truly understood why institutions can continue to make money in a bad market.

One of the most dangerous misunderstandings in the crypto market is to interpret "gains" as "price increases." Therefore, many ordinary traders will automatically become speechless as soon as they enter the bear market: there is no narrative, no copycat season, no skyrocketing list, and no 10x coins, so what else can they do?

This is not how institutions view the market.

They don't necessarily ask "will BTC go up or down tomorrow" every day. Many times, they ask another question: If I don’t want to bet on the direction, is there any structural cash flow that can be collected in the market itself?

This is where Delta Neutral starts.

Delta neutral is not a cool English word. You can understand it as a very simple sentence:

“I don’t want to make money by guessing the rise and fall. I want to offset the risks of rise and fall as much as possible, and then only collect the money that already exists in the market mechanism.”

This article will start from scratch and explain several core mechanisms behind double-digit returns in the bear market: basis/funding rate arbitrage, hedging liquidity provision, Pendle PT/YT, portfolio optimization, and why these things will ultimately require tokenization + treasury infrastructure like City Protocol to truly reach ordinary users.

Let me be clear first: this is not a promise of income, not a call for orders, or "20% annualized profit with eyes closed."

On the contrary, I want you to truly understand: the so-called institutional-level returns are not magic, but engineering. It has both a source of income and a risk boundary; it has both mathematical logic and execution costs; it can allow capital to continue working in a bear market, but it can also wipe out months of gains in an instant because of a wrong parameter, a failed oracle, or a liquidity run.

TL;DR: The most important ability in a bear market is not to work harder to guess the bottom, but to learn to break down "directional trading" into "risk components" and then only choose the part of the risk that you are really willing to take and can really be compensated for.

This is the main line of this article.

1. Don’t just bet on the direction

1.1 Most people are not investing, but doing long streaks

Let’s start with the most basic word: Delta.

In quantitative finance, Delta measures the sensitivity of your portfolio value to changes in the underlying asset price.

Formula Card: Delta - How much directional risk are you exposed

To put it simply, if you hold 1 ETH and ETH rises by 1 US dollar, your portfolio will probably also rise by 1 US dollar, which is Delta = +1.

If you short 1 ETH and ETH rises by 1 USD, you will lose 1 USD, which is Delta = -1.

If the rise and fall of ETH has little impact on the value of your portfolio, then your net delta is close to 0.

Many ordinary traders do one thing every day: leave their entire destiny to positive Delta.

Buying spot products is positive Delta.

Buying a copycat is a positive delta with a higher beta.

Add leverage to go long, which is positive Delta plus liquidation risk.

So when the bear market comes, they are not "bad luck", but the portfolio structure has not been designed for the bear market from the first day.

This is why in the same market, there will be a very counter-intuitive scene: ordinary traders' accounts continue to withdraw, but some professional trading teams can still deliver positive returns.

Not because they are better at predicting tops and bottoms than you are. It's because they don't bet their gains on direction alone.

They will ask:

• Is there any funding rate that can be charged?

• Is there any basis that can be locked?

• Are there any LP fees that can cover impermanent losses and hedging costs?

• Is there any fixed income that can be locked through PT?

• Are there volatility, duration, liquidity mismatches, lending spreads, or market structure errors that can be modeled?

This is the switch from "gambling direction to structure". After understanding this step, you will find that the bear market does not mean that there are no profits, but that most of the profits no longer appear in the form of "increased currency prices".

It became something more boring, more engineering, and more demanding of discipline. Precisely because it is boring, it is closer to an institutional game.

Figure 1: Delta is not metaphysics, it is whether you are betting on the direction or not

1.2 The core of delta neutrality: Turn off price risk and open another door

The goal of delta neutrality is not to never lose money. This sentence is very important.

When many people hear "neutral strategy" for the first time, they mistakenly think that it equals "risk-free". wrong.

Delta neutral just means: I try not to expose the portfolio too much to the price direction of the underlying asset.

What it turns off is directional risk, not all risks. When directional risk is turned off, the remaining sources of income may come from:

• Time

• Funding rate

• Transaction fee

• Term discount

• Volatility

• Lending spread

• Liquidity compensation

• Risk premium

• Market Microstructure

This sounds abstract. Let's use the simplest example.

If you buy $100,000 of ETH spot and short $100,000 of ETH perpetual contract, theoretically your spot is Delta +1 and your perpetual short is Delta -1, and the sum of the two is close to 0.

• If ETH falls from 3,000 to 1,500, the spot leg loses money, but the short leg makes money.

• If ETH rises from 3,000 to 4,500, the spot leg makes money, but the short leg loses money.

• In an ideal world, prices PnL cancel each other out.

Illustration Card: Spatial Visualization - Hedging is not about eliminating risks, but about changing the dimension of returns

Then why do we still want to do this deal? Because there may be a positive funding rate in the perpetual market. In other words, in order to hold a leveraged long position, longs need to pay shorts regularly.

You are not betting on ETH going up or down. You are collecting the rent of "market long leverage demand".

This is the basic logic of basis/funding rate arbitrage.

This is also what institutions like: as long as this rent is stable enough and is greater than handling fees, slippage, borrowing costs, margin occupation and operational risks, it can become a relatively modelable source of income.

Of course, there is a key premise here: relative modelability does not mean certainty.

The funding rate will be reversed. There are risks associated with exchanges. Margins can be mismanaged. Liquidity will disappear. Extreme market conditions will force you to replenish your margin at the worst possible time. Cross-exchange fund dispatching will fail. The interface (API) will be delayed. The risk control system will misjudge.

So the real institutional ability is not to know the formula of "buy spot + short perpetual". For the quantitative team, the real ability is to prevent this formula from being blown away by reality in a market 24 hours a day, 365 days a year.

2. Where do double-digit gains in bear markets come from: three types of disassembled cash flow

2.1 Funding rate: why perpetual contracts must move closer to spot

One of the most unique market structures in the crypto market is perp futures, which are perpetual contracts.

In traditional finance, futures have an expiration date. On the delivery day, the futures price must converge with the spot price.

However, perpetual contracts have no expiration date.

Then the question arises: If there is no expiration date, why does the perpetual price not deviate from the spot forever?

The answer is the funding rate.

The funding rate is a fee paid regularly between long and short. It acts like a gravity system, pulling the perpetual price back to near the spot index price.

When the perpetual price is higher than the spot price, it means that the market is too eager to go long, and a premium appears in the perpetual market. At this time, the funding rate is usually positive, and longs pay shorts. This will encourage more people to short the perpetual, and will also cause some longs to exit, thereby pulling the perpetual price back toward the spot.

On the other hand, when the perpetual price is lower than the spot, it means that the market is too pessimistic or the shorts are overcrowded, the funding rate may become negative, and the shorts pay the longs.

So the funding rate is not essentially money falling from the sky. It is an incentive designed by the market to keep the sustainable price from falling off the anchor.

When you execute a "spot holding + perpetual hedging" transaction, you do two things:

• First, buy spot and own the underlying assets.

• Second, short the perpetual position to hedge the directional risk.

If the funding rate is positive, you receive money as a perpetual short.

To give a very rough example: If the funding rate averages 0.01% / 8 hours and there are three settlements a day, then the annualized rate is approximately:

0.01% × 3 × 365 = 10.95%

Formula card: Funding rate / annualized rate of return - what is collected is not the increase, but the leverage demand

This is why many Delta-neutral teachings say that certain strategies may still achieve double-digit returns in a bear market. Note that it says "possible" here, not "guaranteed".

Because the net income you really get has to deduct a lot of real friction:

• Handling fees for opening and closing positions.

• Slippage for spot and perpetual.

• Margin occupied.

• Borrowing costs.

• The funding rate drops or reverses.

• Exchange, custody, API and account permission risks.

• Margin call pressure under extreme market conditions.

This is why the same theoretical annualized return of 10.95% looks like Easy Money to ordinary traders, but institutions look like an engineering diagram that must be disassembled.

Figure 2: Cash flow structure of basis/funding rate transactions

2.2 Why is it difficult for ordinary traders to make money even though they know the formula

Suppose you see an opportunity: ETH’s perpetual funding rate is high.

You decide to buy $100,000 ETH spot and short $100,000 ETH perpetual.

On the surface, the net delta is 0.

But the real world starts asking you questions right away.

What collateral do you use?

Where is the stock placed?

• Which exchange is Perpetual on?

• Are the spot and perpetual prices synchronized?

• If ETH skyrockets, will your short position margin be enough?

• If ETH plummets and your spot value drops, will the collateralization rate affect the account?

• If the funding rate changes from positive to negative, when will you exit?

• If you exit with poor depth, how many days of profit will slippage eat up?

• If funds need to be moved across chains or exchanges, will the arrival time make you miss the risk window?

• If the exchange is under temporary maintenance or the interface (API) fails, who will handle it?

Ordinary traders often understand strategy as "which two actions to do." Organizations understand strategy as "the conditions under which a complete system can continue to operate."

This is the gap.

Here is a very critical example: For a $100,000 basis trade, if the entry fees, slippage, and total entry and exit friction add up to nearly $280, and the daily funding rate income is only $30, then the payback holding period is approximately 9.3 days.

Illustration card: Order book perspective - why the perpetual premium becomes the funding rate

What does this mean? If your model cannot determine that the funding rate can be maintained for at least ten days, it is not smart to rush into this transaction.

You think you are arbitraging. In fact, you are just turning fees and slippage into certain losses, and then betting that the funding rate will not disappear.

Real professional trading will break this thing down into many variables: average funding rate, funding rate fluctuations, open interest, basis term structure, order book depth, lending rates, collateral efficiency, exchange risk, position limits, margin models, portfolio margin processing, and exit liquidity.

Finally it decides whether to do it or not.

This is the first layer of things I want ordinary users to understand:

Strategy names are not valuable. Only risk control, account, data, monitoring and settlement systems that can implement strategies for a long time are valuable.

2.3 Why can institutions turn 10% into a higher return on capital (ROE)

There is another point that many people tend to overlook: capital efficiency.

• For the same basis trading, an ordinary trader may need $100,000 to buy spot, and also prepare additional margin for shorting perpetual. Capital efficiency is very low.

• Institutions may use portfolio margin or cross-position margin. Because spot longs and perpetual shorts are highly negatively correlated, the risk engine will recognize that the net risk is lower, thus reducing margin requirements.

• If the structure allows, the institution may also use spot as collateral, lend stablecoins or improve margin efficiency, so that the gross notational / required margin can reach 3x to 5x.

This is why a base 10% funding rate benefit, under certain account structures and risk conditions, may translate into a 30% to 50% return on capital (ROE).

But great caution must be exercised here.

An increase in ROE does not mean that the risk disappears. It just means that the same income can be achieved with less own capital.

The higher the capital efficiency, the more sensitive the system is to operational errors, margin rule changes, extreme volatility, exchange risk controls, liquidation thresholds and liquidity breaks.

So ordinary users should not get excited when they see "institutions can achieve 3x to 5x capital efficiency". You should ask instead:

• Who manages the margin?

• Who monitors the liquidation buffer?

• Who is dealing with abnormal market conditions?

• Who decides when to reduce leverage?

• Who is responsible for exchange and custody risk?

• Who is responsible for net worth, positions and profit attribution?

This is why City Protocol’s perspective is not to “teach every user to become a quantitative trader.” That's not realistic. The direction of true scalability is to put complex strategies into a vault with rules, disclosures, net worth, risk control, redemption processes, and on-chain auditability, allowing users to see a simpler product interface while retaining underlying control and verification.

This is infrastructure, and the value of Vault-as-a-Service (VaaS).

2.4 LP charges: not just passive acquisition fees

In addition to funding rates, another common source of delta-neutral returns is providing liquidity.

In decentralized finance (DeFi), automated market makers (AMMs) such as Uniswap allow anyone to become a liquidity provider (LP). You put two assets into the pool, such as ETH and USDC, traders exchange them in the pool, and you charge transaction fees.

Sounds beautiful. But LP fees are never risk-free income.

Its core risk is called impermanent loss.

If you provide liquidity in the ETH/USDC pool, when ETH rises, arbitrageurs will buy ETH from the pool, leaving more USDC in the pool; when ETH falls, the pool will leave more ETH.

In other words, AMM will automatically do something uncomfortable:

Sell your rising assets when they rise and buy your falling assets when they fall.

So the performance of LP will lag behind that of pure HODL.

In the standard constant product automatic market maker, the impermanent loss formula can be written as:

Impermanent Loss = (2 × √Price Ratio) / (1 + Price Ratio) - 1

Formula Card: Impermanent Loss - Why LP loses to HODL

• If the price doubled, IL would be approximately -5.72%.

• If the price halved, IL would also be -5.72%.

The more extreme the price movement, the more pronounced the IL.

Uniswap V3 has introduced centralized liquidity, allowing LPs to concentrate funds in a certain price range. In this way, capital efficiency is higher and fee income may be higher, but the risk is also amplified.

When the price leaves your range, your position may become one of the assets entirely and stop earning fees.

This is why professional LP teams don’t just look at APR.

They will watch

• Volatility

• Interval width

• Handling fee levels

• Trading volume and quality

• gas cost

• Rebalancing frequency

• Are there hedging instruments available

• MEV

• Oracle delay

• Inventory risk

To optimize the LP strategy.

2.5 Hedging LP: You think you are charging fees, but you are actually managing a deformed position

How to make LP positions delta neutral?

The most intuitive way is to hedge the ETH exposure in the LP position.

If your LP position currently holds the equivalent of 20 ETH, you will be short 20 ETH perpetually.

The ETH in LP is Delta +1, the perpetual short position is Delta -1, and the net Delta is close to 0.

Illustration card: Delta changes, Gamma is the speed at which it changes

The problem is: LP positions are not static.

AMM will automatically adjust the proportion of assets in your pool as prices change.

• ETH rises, the pool sells ETH, and the ETH in your LP position becomes less.

• ETH falls, the pool buys ETH, and the ETH in your LP position increases.

• So, your delta keeps changing.

So, this requires the use of Gamma. Gamma measures how quickly delta changes with price.

LP positions usually have negative gamma. It's a lot like selling volatility: the more the price moves, the more you need to constantly adjust your hedge.

• If ETH rises and the ETH in LP decreases, your original short position may be too large and you need to buy back part of it.

• If ETH falls and the ETH in LP becomes long, you need to increase your short position.

Note that this action is very counter-intuitive:

Buy back when the price rises, add short when the price falls. That is, dynamic hedging itself may allow you to "buy high and sell low" locally. This is the cost of negative gamma.

Then why do it?

Because LP fees may be high enough to cover impermanent losses, hedging costs, rebalancing costs, and gas/slippage.

Top teams will set precise rebalance thresholds, such that the price only adjusts every 1%, rather than every second. They will use a stochastic model to find the optimal frequency: if it is adjusted too little, the delta drift will be too large; if it is adjusted too much, fees and gas will eat up the benefits. Therefore, the essence of hedging LP is not to "put it in and earn handling fees", but a dynamic risk control system.

What ordinary traders see is the pool APR. What institutions see is the relationship between fee revenue and negative gamma costs.

Understand this, and you will no longer be easily deceived by the words "high APR pool".

Figure 3: LP fees are not free, negative Gamma will cause the position to go awry

2.6 Pendle: Split income into principal and interest

After DeFi enters the mature stage, a very important change is that the fixed income market begins to emerge.

Pendle is the most typical project among them.

It does something that is very familiar in traditional finance but very imaginative in DeFi: tokenization of income rights.

Suppose you have an interest-earning asset, such as stETH.

Its value comes from two parts:

• First, principal.

• Second, the income generated in the future.

Pendle splits these two parts into two tokens:

• PT, which is the principal token, represents the principal. You can think of it as a zero-coupon bond in DeFi.

• YT, which is the income token, represents the right to future income. You can think of it as a "ticket for future interest."

If 1 stETH is currently worth $1, a 180-day expiry of PT-stETH might trade at $0.95.

At expiration, 1 PT can be exchanged for 1 stETH. So the discount convergence from 0.95 to 1.00 is fixed income.

The implied annualized rate of return can be roughly written as: Implied annualized rate of return = ((1 / PT price) - 1) × (365 / days to maturity)

Formula card: Pendle PT/YT - Where does fixed income come from

If PT Price = 0.95 and the expiration time is 180 days, then: ((1 / 0.95) - 1) × (365 / 180) ≈ 10.67% annualized

This is why PT is attractive to Curators of many strategies. Because it turns the originally floating DeFi income into something closer to fixed income.

Of course, it's still not risk-free. You still have to consider smart contract risk, underlying asset risk, liquidity risk, expiration risk, oracle risk, and exit slippage.

But at least the earnings structure becomes more readable.

YT is something else.

Because PT Price + YT Price = Underlying Asset Price. If underlying is 1.00 and PT is 0.95, then YT is theoretically 0.05.

You use $0.05 to buy the right to future earnings on $1 of principal, which is equivalent to a 20x rate of return leverage. If the future real return is higher than the market's implied return, YT makes money; if it is lower than the implied return, YT loses money.

So PT is to buy certainty, and YT is to buy volatility in yields.

This is the beauty of the tokenization of income rights: it splits a vague "DeFi annualized rate of return" into two financial components that can be traded, combined, priced, and hedged.

This is important from a City Protocol perspective.

On-chain finance in the future should not only consist of “buying coins” and “mining”. It should have fixed income, floating income, term structure, risk stratification, strategy shares, net worth, redemption period, accredited investor rules, verification reporting and portfolio management.

This is like a real financial market.

Figure 4: Pendle splits income into "principal" and "interest"

3. The real moat is not strategy, but combination and risk control

3.1 Why portfolio optimization is more important than a single strategy

So far, we have looked at three types of mechanisms:

• Basis/funding rate arbitrage: collect the money required for leverage.

• Hedging LP: charge transaction fees, but must manage negative Gamma.

• PT Fixed income: Use term discount to lock in fixed income and reduce directional risk through hedging.

Many people make a mistake when they learn this: they start asking "Which strategy has the highest returns?"

This is a question the average trader will ask.

In my past experience, institutions do not only ask for the highest return.

The organization will ask:

• Which strategy’s revenue source is least correlated with other strategies?

• Which strategy will fail altogether in extreme market conditions?

• Which strategy has the greatest tail risk?

• Which strategy requires the most liquidity?

• Which strategy has the longest redemption period?

• Which strategy seems to have stable returns, but actually hides the risk of jumps in smart contracts/counterparties/oracles/liquidity?

• Which strategy is suitable for core positions, and which one can only be used for satellite allocation?

This is combinatorial optimization.

The most common risk-return indicator in traditional finance is the Sharpe Ratio:

Sharpe = (Portfolio Return - Risk-Free Rate) / Standard Deviation

But in a delta-neutral strategy in the crypto market, the Sharpe ratio is not always good enough.

Because Sharpe penalizes all swings, including upward swings.

The return distribution of many delta neutral strategies is not a beautiful normal distribution, but "usually small profits and occasional big losses." For example, stablecoin de-anchoring, oracle failure, smart contract attacks, exchange freezes, and liquidity depletion.

These risks are not ordinary fluctuations.

They are more like jump risks and downside tails.

So many professional frameworks use the Sortino Ratio. Sortino only punishes downward fluctuations and is more suitable for this kind of strategy of "stable returns but need to guard against tails".

Illustration Card: Sharpe vs Sortino - Why Institutions Care More About Downside Volatility

In addition, position size is also critical. The Kelly formula tells you how much capital you should theoretically allocate given a certain expected return and variance. But Kelly is too radical.

Formula Card: Kelly Position - Survival is more important than filling up

Institutions usually use a Kelly score, such as 25% to 50%, because the model will definitely be wrong and the market status will definitely change.

The core logic is that the system that survives in the long term is usually not the system with the highest returns, but the system that can admit that it will make mistakes and reserve room for mistakes.

3.2 The risk map that ordinary users need to understand most

In the past ten years, there has been a very common but misleading way of advertising: packaging complex strategies as "stable returns" and then only showing annualized returns. This is all too common in the crypto market.

But if we really want new finance to reach a larger user base, the industry must learn to explain risks in language that ordinary people can understand.

Delta neutral is not without risk.

It just changes the risk from "price direction" to other more hidden dimensions.

• The main risks of the funding rate strategy are funding rate reversal, basis compression, exchange risk, margin risk, borrowing costs and exit liquidity.

• The main risks of hedging LP are impermanent losses, negative Gamma, rebalancing costs, gas, MEV, range selection errors and hedging slippage.

• The main risks of PT fixed income are underlying assets, smart contracts, maturity liquidity, oracles, anchoring, redemption paths and hedging basis.

• The main risks of the revolving lending strategy are collateral price fluctuations, soaring lending rates, liquidation thresholds, oracle delays, and liquidity spirals.

• The main risks of treasury products are strategy manager risk, net worth calculation risk, custody/account risk, authority risk, redemption liquidity, smart contract risk and operational risk.

Illustration Card: Risk Map for Ordinary Users - When you see the annualized return, ask where the returns and risks come from

This risk map is not intended to scare users away. On the contrary, it is to let users know that for truly serious income products, the risks must be clearly stated.

If a product only tells you the annualized rate of return and does not tell you the source of risk, redemption mechanism, net worth update, suspension conditions, strategy boundaries and capital flow, then what you see is not simplification, but simplification.

Good financial products should simplify the experience, but not the facts.

This is a point that City Protocol attaches great importance to when building treasury infrastructure.

User interfaces can be simple. The underlying rules must be serious.

3.3 Why manual execution is almost unsuitable for ordinary people

We assume that an ordinary user who studies seriously has really understood all the previous content.

• He knows Delta.

• He knows funding rates.

• He knows impermanent loss.

• He knows PT/YT.

• He knows Sortino ratios and Kelly fractions.

The question is, can he do it himself? In most cases, no. Because understanding strategy and operating strategy are two completely different abilities. Of course, understanding is necessary. You must have sufficient understanding to maximize the benefits of these strategies. However, this doesn't mean you have to implement these strategies manually. Manually executing a delta neutral strategy typically requires:

• 24/7 market monitoring.

• Real-time position and risk calculations.

• Accounts and permissions for multiple centralized exchanges, decentralized exchanges and DeFi protocols.

• Margin, mortgage, lending and liquidation management.

• Automated rebalancing.

• Emergency rules under abnormal market conditions.

• MEV protection and private RPC.

• Oracle latency monitoring.

• Cross-chain and cross-exchange fund scheduling.

• Net worth calculations, expense attribution and reporting.

• If it is for external users, subscription, redemption, participation qualifications, risk disclosure, audit trails, capacity management, expense accounting and settlement records are also required.

This is no longer a matter of "being able to trade". This is a question of financial infrastructure.

It is here that our role and vision at City Protocol begin to become clear.

We don't want every ordinary user to manually calculate Gamma. We want to turn those complex but valuable revenue sources into more understandable, verifiable, and distributable on-chain financial products through TaaS, VaaS, and NaaS.

4. The problem that City Protocol wants to solve: turning institutional-level strategies into products that ordinary people can understand

4.1 City Protocol: Transforming institutional-level strategies from “trading” to “product”

City Protocol 当前的核心目标，是成为由代币化和金库驱动的新金融开放基础设施。

这句话绝不仅仅是口号，而是一个非常具体的市场问题：

高质量收益来源正在出现，但大多数普通用户无法直接理解、接入、验证和管理它们。

收益提供方、资产发起方、策略管理人有策略和资产，但他们不一定想自己搭代币发行、净值预言机、投资者权限、证明机制、申购 / 赎回、数据看板、接口（API）和合作方分发系统。

钱包、交易所、交易终端和金融科技应用想给用户提供收益产品和新金融服务，但他们也不想从零集成一堆碎片化系统。

用户想要的是简单入口：我存入资产，我看到金库，我理解风险，我知道净值，我知道什么时候能赎回，我知道收益从哪里来。

这就是 City Protocol 的基础设施位置。

• TaaS，也就是“代币化即服务”，把收益来源变成可编程、可验证、可分发的代币化收益产品。它不只是发一个代币。它要定义这个代币代表什么、净值怎么算、谁能参与、哪些数据可以验证、什么时候能赎回、异常时如何暂停、哪些合作方可以集成。

• VaaS，也就是“金库服务”，是资本进入策略之前的运营层。用户不是把钱直接打给某个 CEX、某个交易员、某个 DeFi 合约或某个借款人。资本先进金库，经过权限、策略白名单、风险限制、净值记录、赎回机制、结算记录和审计轨迹。

• NaaS，也就是“新金融服务”，则把这些能力开放给合作方和应用层。钱包可以集成 Earn 收益模块。交易终端可以集成金库。新银行和金融科技应用可以集成收益、兑换、出入金、卡、支付、借贷和奖励。开发者可以通过接口（API）/ 开发工具包（SDK）把复杂金融能力嵌入自己的产品。

这就是我们理解的新金融：不是单个应用，而是一套可以被不同产品调用的金融基础设施。

图 5：City Protocol 想做的不是“给你一个策略”，而是把策略产品化

4.2 一个用户眼中的金库，和一个系统眼中的金库

对用户来说，一个金库应该很简单。

• 我看到金库名称。

• 我看到策略类型。

• 我看到支持资产。

• 我看到指示性年化收益率或历史收益表现。

• 我看到容量、费用、风险标签、赎回条款和净值更新时间。

• 我知道怎么存入。

• 我知道怎么申请赎回。

• 我知道什么时候领取。

• 这是用户层。

但系统层看到的是另一套东西：

• 存款合约是否正确记账？

• 金库份额或收据是否代表用户的比例权益？

• 净值由谁计算、用什么数据、多久更新？

• 净值更新是否需要预言机达到法定确认数量？

• 如果净值偏离过大，是否触发偏离保护？

• 策略管理人能不能随意把钱转走？

• 允许的策略、执行场所、适配器和函数选择器是否被白名单限制？

• 紧急暂停由谁触发？

• 解除暂停是否需要更严格权限？

• 赎回是即时流动型，还是按周期结算？

• 每个已结算周期是否锁定当时的净值、价格、费用参数和记账状态？

• 用户是否可以在链上或数据看板看到关键事件？

这些东西很难在 X/Twitter 里讲完，但它们才是金库产品能不能长期可信的基础。

所以当我们说 City Protocol 要降低普通用户接触机构级收益的门槛，我们不是说要消灭复杂性。

复杂性不会消失。复杂性只会被更好的基础设施吸收、组织、披露和约束。

在Web3这十年间，唯一不变的，这就是这金融产品工程化所必经的过程。

五、熊市里的真实机会：把风险拆开，把访问权产品化

5.1 为什么熊市反而适合讲这件事

牛市里，大家都很忙。忙着追叙事，忙着看涨幅榜，忙着换头像，忙着计算“如果涨到上一个历史高点我能赚多少”。

牛市不奖励耐心解释。牛市奖励速度、胆量和情绪。

但熊市不一样。

熊市会把所有没有现金流、没有风险控制、没有真实需求、没有产品能力的东西慢慢洗掉。

所以这时候，我们开始问更严肃的问题：

• 我的稳定币是否？

• 我能不能不靠单边市场获得收益？

• 收益到底来自哪里？

• 谁在承担风险？

• 如果市场继续下跌，我的本金怎么保护？

• 如果我要退出，赎回机制是什么？

• 如果策略出问题，谁能暂停？

• 如果净值异常，系统怎么处理？

这些问题听起来没有炒币好玩。但它们决定下一阶段链上金融能不能从投机场走向资本市场。

真正的金融基础设施，往往是在熊市里被认真需要的。因为只有当价格不再自动上涨时，市场才会逼你回答一个问题：

除了赌涨，你还能提供什么？

City Protocol 的答案是：代币化、可验证金库、净值报告、赎回流程、合作方集成和模块化新金融服务。

5.2 给普通用户的阅读框架：以后看到高收益产品，先问七个问题

如果你读到这里，只想带走一套实用检查清单，我建议你记住下面七个问题。

第一，收益来源是什么？

是资金费率、LP 手续费、借贷利差、现实世界资产利息、基差、PT 折价、市场中性交易，还是代币激励？如果讲不清楚来源，只展示年化收益率，先谨慎看待。

第二，价格方向风险是否被对冲？

如果对冲了，用什么工具对冲？对冲频率如何？对冲失败会发生什么？如果没对冲，那它其实可能只是一个包装过的多头仓位。

第三，主要尾部风险是什么？

稳定币脱锚、智能合约攻击、交易所冻结、预言机延迟、流动性枯竭、借贷利率飙升、对手方违约，哪一个会真正伤害本金？

第四，净值怎么算？

谁提供数据？谁验证？多久更新？是否有偏离保护？异常时是否暂停申购或赎回？

第五，赎回机制是什么？

随时赎回、T+1、每周、每月、按周期结算，还是需要提前通知？高收益往往意味着你在某处提供了流动性补偿。

第六，策略边界是什么？

策略管理人是否只能在已批准的授权范围内执行？是否有白名单、配置上限、回撤控制、抵押率阈值和紧急暂停？

第七，这个产品是不是可验证？

有没有链上事件、证明、储备证明、净值历史、结算记录、数据看板、审计报告或第三方确认？

问完这七个问题，你不一定能成为机构投资人。但你会明显减少被“高年化包装”收割的概率。更重要的是，你会开始用正确的语言理解收益。

5.3 我们真正想民主化的，不是复杂交易，而是可理解的访问权

很多 Web3 项目喜欢说“让金融更民主化”。然而，这句话说太多之后，已经开始失去了他原本的重量。

• 真正的金融民主化，不是把一个复杂策略丢给用户，然后说“你自由了”。那不叫民主化，那叫把风险外包给不懂的人。

• 真正的金融民主化，是把机构级能力拆解成普通用户可以理解、可以比较、可以参与、可以退出、可以验证的产品形态。

• 用户不需要知道每一次对冲的精确 Gamma。但用户应该知道这个金库的收益来源是否依赖对冲。

• 用户不需要自己跑每一个预言机。但用户应该知道净值有没有验证机制、有没有偏离检查、有没有更新时间。

• 用户不需要手动执行资金费率套利。但用户应该知道这个策略是否会受到资金费率反转和交易所风险影响。

• 用户不需要读完所有智能合约。但用户应该能看到关键权限、暂停机制、策略白名单和审计信息。

这就是我认为 City Protocol 会为Web3发展的下一步成为必要的基础设施的原因。

我们不是在把金融变得更神秘。我们是在把原本藏在机构账户、交易系统、Excel 模型和风控会议里的东西，逐步变成可组合、可披露、可集成、可验证的链上基础设施。

5.4 最后的话：熊市奖励会设计系统的人

每个周期都会教育一批人。

牛市教你贪婪。熊市教你结构。

上一轮周期，很多人以为自己是投资者，其实只是流动性好的 Beta 乘客。当市场上涨时，他们把上涨当能力。当市场下跌时，他们把回撤怪给环境。

但真正能跨周期留下来的资本，会慢慢从“我押哪个币”进化到“我承担什么风险、收取什么补偿、用什么系统管理它”。

Delta 中性收益就是这个转变的一个入口。它让你第一次意识到：收益不只来自方向。

• 资金费率是杠杆需求的价格。

• LP 手续费是流动性服务的价格。

• PT 折价是时间和确定性的价格。

• YT 是未来收益率波动的价格。

• 金库收益是策略、风控、流动性和基础设施共同组织后的结果。

当你开始这样看市场，你就不再只是一个等待牛市拯救的人。

你开始像一个资本配置者。

这不是说每个人都应该去手动做 Delta 中性。恰恰相反，大多数人不应该。

大多数人应该先理解机制，再选择可信的产品、可信的基础设施和适合自己风险承受能力的入口。

City Protocol 想参与建设的，就是这个入口。不是让复杂性消失。而是让复杂性被正确地封装、验证、披露、分发和使用。

熊市不会奖励最会喊单的人。熊市奖励能活下来的人。

更长期看，市场奖励的也不是某一次猜对方向的人。市场奖励的是那些能把风险拆开、把收益产品化、把信任工程化的人。

这就是为什么我相信，下一阶段的链上金融，不会只属于投机者，而是会属于基础设施建设者，也会属于那些愿意理解现金流与结构风险的用户。

如果你读完这篇文章，下一次看到一个 15%、20%、30% 年化收益率的产品时，不再只问“能不能冲”，而是开始问“收益从哪里来、风险在哪里、谁在管理、如何验证、怎么退出”，那这篇文章就有了价值。

熊市不是没有机会。熊市只是把机会藏在结构里。

我希望这个群不是一个只转发行情和口号的地方。而是一个能让更多普通用户慢慢建立金融直觉、风险语言和产品判断力的地方。

在这里，我们会继续分享关于 Delta 中性、代币化收益、金库基础设施、TaaS、VaaS、NaaS，以及 City Protocol 正在建设的新金融栈的更多内容。

如果你已经不满足于只问“今天买什么”，而是开始想问“这个收益为什么存在、风险由谁承担、系统如何验证”，那你会在这里找到同路人。