> For the complete documentation index, see [llms.txt](https://docs.hermetica.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.hermetica.fi/hbtc/how-it-works.md).

# How it Works

hBTC enables Bitcoin holders to earn **BTC-denominated yield** while retaining self-custody and the ability to redeem for **native Bitcoin**.

#### Deposit & Mint

Users deposit Bitcoin via the decentralized sBTC bridge and stake sBTC into the hBTC vault. In return, the vault mints **hBTC**, representing a proportional share of pooled assets and strategy exposure.

#### Yield Accrual

hBTC accrues yield daily through on-chain strategies, including basis capture and Bitcoin-native staking. Yield is automatically compounded and reflected in the **hBTC share price**. All strategy profits are ultimately converted back into Bitcoin.

#### Withdraw & Redeem

Users may redeem hBTC for sBTC or native Bitcoin, subject to protocol cooldowns and underlying chain settlement times defined by the sBTC bridge.

#### Risk Controls & Transparency

The protocol employs automated controls for leverage, delta exposure, and interest spread regimes. All material metrics, positions, and transactions are transparently displayed and independently verifiable on-chain.

Detailed explanations of capital flows, yield mechanics, risk controls, and accounting are available in the sections below:

<table data-view="cards"><thead><tr><th></th><th data-hidden data-type="image">Cover image (dark)</th><th data-hidden data-card-target data-type="content-ref"></th><th data-hidden data-card-cover data-type="image">Cover image</th><th data-hidden data-type="image">Cover image (dark)</th><th data-hidden data-card-cover-dark data-type="image">Cover image (dark)</th></tr></thead><tbody><tr><td>Flows</td><td><a href="/files/sj4TapUOpE0jJ5VkRf2Y">/files/sj4TapUOpE0jJ5VkRf2Y</a></td><td><a href="/pages/Q7VGmv9CHEVqJYJuNg99">/pages/Q7VGmv9CHEVqJYJuNg99</a></td><td><a href="/files/HeGRXAj2uCLJgSgxivZL">/files/HeGRXAj2uCLJgSgxivZL</a></td><td><a href="/files/jKZOz1zYNtRJywS6Bvj4">/files/jKZOz1zYNtRJywS6Bvj4</a></td><td><a href="/files/mYxl1YYmpwRpfLsjfIv5">/files/mYxl1YYmpwRpfLsjfIv5</a></td></tr><tr><td>Yield</td><td><a href="/files/OZdwrTvu6fQJQUlP6Qsd">/files/OZdwrTvu6fQJQUlP6Qsd</a></td><td><a href="/pages/TZYsIKEWWfS3UZAF3s8X">/pages/TZYsIKEWWfS3UZAF3s8X</a></td><td><a href="/files/cMZPHaBeweeAs5xpVHOI">/files/cMZPHaBeweeAs5xpVHOI</a></td><td><a href="/files/g62d8fvMMLw51STP4T4B">/files/g62d8fvMMLw51STP4T4B</a></td><td><a href="/files/F3yScpg5vVlTMwtWz45W">/files/F3yScpg5vVlTMwtWz45W</a></td></tr><tr><td>Liquidity</td><td><a href="/files/j9448Mr9HYLwJNXxfE3w">/files/j9448Mr9HYLwJNXxfE3w</a></td><td><a href="/pages/s390Njc16sO1Y1JdkpwI">/pages/s390Njc16sO1Y1JdkpwI</a></td><td><a href="/files/ydfJXdRc72u5kib3Ti3h">/files/ydfJXdRc72u5kib3Ti3h</a></td><td><a href="/files/P6aYmuTzaAi9hIMvFERj">/files/P6aYmuTzaAi9hIMvFERj</a></td><td><a href="/files/fUIPI3M7YvFzBPJpg9Lh">/files/fUIPI3M7YvFzBPJpg9Lh</a></td></tr><tr><td>Risk Controls</td><td><a href="/files/pEWmWllIMrxjJ9tDWu21">/files/pEWmWllIMrxjJ9tDWu21</a></td><td><a href="/pages/JPh6kgU6T6D4074h3MUH">/pages/JPh6kgU6T6D4074h3MUH</a></td><td><a href="/files/MXRR8zAI8ygPNt8ZJSbx">/files/MXRR8zAI8ygPNt8ZJSbx</a></td><td><a href="/files/vDfksXBJANPHSr1e36tV">/files/vDfksXBJANPHSr1e36tV</a></td><td><a href="/files/hCNXjP86U40Dvhl41nsg">/files/hCNXjP86U40Dvhl41nsg</a></td></tr><tr><td>Accounting</td><td><a href="/files/nGqSH8c4zVD8ZuFewJTE">/files/nGqSH8c4zVD8ZuFewJTE</a></td><td><a href="/pages/obO4fXdQpXyYf1G2xHSa">/pages/obO4fXdQpXyYf1G2xHSa</a></td><td><a href="/files/HkcM6jYG05wRwjUbFJFq">/files/HkcM6jYG05wRwjUbFJFq</a></td><td><a href="/files/PMTz2TO2DELpI26LXgJ7">/files/PMTz2TO2DELpI26LXgJ7</a></td><td><a href="/files/Z8YFyNIckLy4nUjcrR2c">/files/Z8YFyNIckLy4nUjcrR2c</a></td></tr><tr><td>Governance</td><td><a href="/files/m3YuoBxsYMeR7SGXaSIz">/files/m3YuoBxsYMeR7SGXaSIz</a></td><td><a href="/pages/T5esV7ksQu8KSJkPHkf2">/pages/T5esV7ksQu8KSJkPHkf2</a></td><td><a href="/files/bQmSjmVDW5vCmVZ7hyrc">/files/bQmSjmVDW5vCmVZ7hyrc</a></td><td><a href="/files/lCHPv5Up8jn0YXSdVInT">/files/lCHPv5Up8jn0YXSdVInT</a></td><td><a href="/files/gd7UaswMGHbqMtbVgUcZ">/files/gd7UaswMGHbqMtbVgUcZ</a></td></tr></tbody></table>