> For the complete documentation index, see [llms.txt](https://docs.botanixlabs.com/bitcoin-yield/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.botanixlabs.com/bitcoin-yield/technical-details/yield-generation-mechanism.md).

# Yield generation mechanism

Bitcoin Yield generates returns through a transparent and sustainable model that leverages transaction activity on the Botanix network.

### Fee Distribution

* **Source of Yield**: 50% of all gas fees from transaction activity on the Botanix network are directed to the staking protocol
* **Distribution Method**: Fees are collected in BTC and distributed proportionally to stBTC holders
* **Continuous Accrual**: Yield accumulates continuously as transactions occur on the network
* **Transparent Mechanism**: All fee collection and distribution happens on-chain and can be verified

### From Network Activity to Yield

1. Users pay gas fees in BTC for transactions on the Botanix network
2. The network automatically allocates 50% of these fees to the staking contract
3. As fees accumulate in the contract, the value of stBTC relative to BTC increases
4. This increased value is realized when stBTC is redeemed for BTC

### Yield Compounding

The yield in Bitcoin Yield compounds automatically:

* As new fees enter the staking pool, they increase the BTC backing of all stBTC tokens
* This means future yields are calculated on both your initial deposit and previously accrued rewards
* The compounding effect leads to greater returns over longer staking periods

### Proof-of-Stake Integration

While currently the yield comes solely from transaction fees, the future design includes:

* Integration with the Spiderchain's full proof-of-stake consensus
* Additional rewards for securing the network
* Potential slashing conditions to ensure network security