Thetanuts Finance Launches Leveraged Liquid Restaking

The onchain options protocol has integrated with Pendle Finance to tap multiple yield sources.

By: Pedro Solimano Loading...

image of options trading

Thetanuts Finance, an onchain options protocol launched in September 2021, has partnered with Pendle Finance. Users can “Zap” their PT-eETH tokens and deposit them into the Thetanuts Finance v3 Lending Market.

They then borrow ETH, depositing it into an ETH Call (ETH-C) Basic Vault, where it generates additional option premiums but takes on short volatility risk. The $ETH-C is then boosted within the Thetanuts Finance v3 Lending Market, generating additional lending interest that’s returned to users.

Ethereum’s restaking ecosystem has been on a tear, with total value locked surging 500% to $10 billion in the past thirty days. The Thetanuts - Pendle partnership is yet another example of how DeFi applications are finding ways to layer points and leverage together as they try to entice traders with higher yields.

Pendle is a DeFi protocol that splits yield-bearing tokens into their yield (YT) and principal (PT) components. It has $2.3 billion in TVL and offers traders a way to leverage yield opportunities without locking up principal while arbitrageurs rebalance the market inside Pendle’s custom automated market maker.

Thetanuts, which has a TVL of $17 million, will tap into Pendle’s 28% yield on the PT-eETH asset, the industry’s highest fixed yield. Today’s partnership is dubbed the Thetanuts Finance Leveraged LRT Strategy Vault and will focus on altcoin options markets.

Using leveraging restaking assets for altcoin options markets is very uncommon for DeFi, according to the team at Thetanuts. Being among the first is a risky bet with a potentially high upside for the projects that make the move.

Recently, Gearbox became the first decentralized finance protocol to add leverage to the liquid restaking trade, causing degens to flock to it in droves. It had an impressive first 24 hours, attracting over 2,600 ETH — $7.9 million at the time.

And with the attention the restaking ecosystem is getting, that market seems poised to grow substantially.

Staking is a consensus mechanism that refers to users locking up digital assets into a smart contract platform and receiving tokens as rewards for doing so. Liquid restaking, which has taken the spotlight in recent months, involves the same staked assets that are now used in other protocols whilst locked in the original protocol.

How it works

Holders of PT-eETH can choose whether to wait for their tokens to mature on June 27 or exit their position earlier if the implied APY is favorable.

By depositing their PT tokens in the vault, users will earn additional rewards from multiple sources: lending interest, trading fees, ETH-C Basic Vault option premiums, and $NUTS rewards after Thetanuts Finance’s governance token goes live.

The team at Thetanuts acknowledges three specific risks: short-term volatility – “which seems like only a small one,” they said, smart contract risks, and potential de-pegs.

The Thetanuts Leveraged LRT Strategy Vault will use EtherFi, Ethereum’s leading liquid restaking protocol. EtherFi recently announced a $23 million Series A funding round to further strengthen its already outsized hold on the LRT ecosystem, which currently accounts for 36% of the $4.7 billion sector.