Leveraged Yield Farming Using Sturdy Finance
- Featured Yields: Up to 78% APR on Stablecoins, 81% APR on ETH
DeFi Alpha is a weekly newsletter published for our premium subscribers every Friday, contributed by Defiant Advisor and DeFi investor at 4RC, DeFi Dad, and our Degen in Chief yyctrader.
It aims to educate traders, investors, and newcomers about investment opportunities in decentralized finance, as well as provide primers and guides about its emerging platforms. It is meant to be highly actionable and shareable.
Any information covered in DeFi Alpha should not form the basis for making investment decisions nor be construed as a recommendation or advice to engage in investment transactions. Any mention of a token or protocol should not be considered a recommendation or endorsement.
Latest Developments
Before we get started, here are the top headline-grabbing events from this week that every savvy DeFi investor ought to keep on their radar.
- Arbitrum Amends Foundation Proposal After Failed Vote
- Report On Criminal Use Of DeFi Argues Most Protocols Are Subject to Bank Secrecy Act
- LayerZero Valued At $3B In Series B
- Free MEV Blocker RPC “Pays Users To Protect Themselves”
- Gauntlet Flags Potential cbETH Liquidation Risk On Aave
Sponsored Post
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Yield Alpha
Each week we will provide options to earn yield on ETH, WBTC, stablecoins, and other major tokens.
- ETH: Up to 81.6% APR looping ETH 4X on Radiant Capital on Arbitrum
- This yield is accrued in ETH borrowing interest and mostly RDNT rewards.
- To participate, it requires a leveraged ETH/ETH position with 5% of the value of the looped position in the 80/20 RDNT/ETH Balancer LP.
- The RDNT LP must be staked for 12 months to achieve 81.6%.
- One must deposit ETH into Radiant here and loop 4X here + zap into an LP staked for 1-12 months (1 month = 4% net APR vs 12 months = 81.6% net APR).
- Caution: This is a leveraged ETH position that could get liquidated if borrowers do not maintain a health factor > 1. This is higher risk than lending or staking.
- WBTC: Up to 51% APR looping WBTC 4X on Radiant Capital on Arbitrum
- This yield is accrued in WBTC borrowing interest and mostly RDNT rewards.
- To participate, it requires a leveraged WBTC/WBTC position with 5% of the value of the looped position in the 80/20 RDNT/ETH Balancer LP.
- The RDNT LP must be staked for 12 months to achieve 51%.
- One must deposit WBTC into Radiant here and loop 4X here + zap into an LP staked for 1-12 months.
- Caution: This is a leveraged WBTC position that could get liquidated if borrowers do not maintain a health factor > 1. This is higher risk than lending or staking.
- MATIC: 18.4% APY with a MaticX/MATIC leveraged staking position in Cian
- The yield is backed by validator rewards using MaticX as collateral, and looping borrowed MATIC against the MaticX.
- To participate on Polygon, one can follow the prompts to deposit into the MATICX/MATIC Leveraged Staking strategy here on Cian.
- ATOM: 21.4% APR staking ATOM with Keplr Wallet on Cosmos Hub
- The yield earned is issued in ATOM.
- To participate, one must set up a Keplr Wallet, go to the Cosmos Hub validators on Keplr Dashboard, rank by APR, choose a validator, and click Delegate.
- Then, I specify how many ATOMs and follow the prompts to Delegate.
- BNB: 13% APY with the BNB/BNBx Ellipsis LP
- AVAX: 44% APY with sAVAX/AVAX leveraged staking position in Cian
- The yield is backed by validator rewards using sAVAX as collateral, and looping borrowed AVAX with Aave.
- To participate on Avalanche, one can follow the prompts to deposit into the sAVAX/AVAX Folding – Aave strategy here on Cian.
- SOL: 6.8% APY staking SOL with stSOL by Lido
- This is backed by SOL staking yield.
- To participate, one must deposit SOL here or buy it on a Solana DEX.
- FTM: 4.7% APY staking sFTMx liquid staking derivative by Stader
- The yield is issued in FTM rewards, as sFTMX is earning FTM via validator rewards to support Fantom’s PoS network.
- To participate, one must deposit FTM for sFTMX here on Stader.
- Stablecoins: Up to 78% APR looping DAI 4X on Radiant Capital on Arbitrum
- This yield is accrued in DAI borrowing interest and mostly RDNT rewards.
- To participate, it requires a leveraged DAI/DAI position with 5% of the value of the looped position in the 80/20 RDNT/ETH Balancer LP.
- The RDNT LP must be staked for 12 months to achieve 78% APR.
- One must deposit DAI into Radiant here and loop 4X here + zap into an LP staked for 1-12 months.
- Caution: This is a leveraged DAI position that could get liquidated if borrowers do not maintain a health factor > 1. This is higher risk than lending or staking.
Please be aware we do not always report the highest yield rates because some high yields may be less sustainable due to high inflation token rewards or fewer LPs participating.
Tutorial
Earn Up To 42% APY with 0% Interest and 9X Looping with ETH/stETH on Sturdy Finance
Sturdy Finance is a newer DeFi lending protocol that enables users to earn high stablecoin yields, high ETH yields, and take out interest-free loans. Borrowers on Sturdy use interest-bearing staked assets as collateral, allowing them to farm projects like Convex, Yearn, and Lido at up to 10x leverage.
In a positive-sum way, the liquidity for leverage comes from lenders, who earn a portion of farming profits. Lending on Sturdy is ideal for users who wish to benefit from the work of borrowers without having to spend as much time and take on increased risk.
Sturdy enables yield farmers to amplify their yields in a sustainable, profitable way. While Sturdy borrowers earn yield from their deposited collateral, they are also able to take out loans at 0% APY if the utilization rate of the asset they are borrowing is below 80%.
Sturdy keeps liquidation risk low by allowing users to borrow like-assets which track one another in price. For example, Sturdy borrowers might borrow WETH against a Curve ETH/stETH LP staked on Convex or borrow USDC against a Curve FRAX/USDC LP staked on Convex.
When utilization is greater than 80% in a market (the percentage of deposited funds that have been borrowed), interest rates increase by 3% for every percent that utilization goes above 80%, meaning at 100% utilization, borrowers pay 60% APR. So, there is a clear incentive for borrowers to repay/deleverage to get utilization back below 80%.
The underlying yield on Sturdy is harvested every 24 hours and distributed between borrowers and lenders. For lenders, yield is paid out in the same token that they deposited. For borrowers, yield is paid out in the yield token (ie CRV, BAL) and can be claimed on the Dashboard tab.
Sturdy currently operates with a Stablecoin Market and an Ether Market.
- The Stablecoin Market has $20.6M deposited and $6.6M borrowed.
- The Ether Market has $10.2M in deposits and $3.2M borrowed.
Sturdy has a non-transferrable governance token of the Sturdy DAO, $STRDY, which governs the Sturdy protocol. It has a total supply of 100,000,000, but because it’s non-transferable, it cannot be awarded to lenders or borrowers on Sturdy.
Today, I’ll show how I can leverage interest-free with like-assets (borrow WETH against Curve ETH/stETH LP) to earn ~27.5% APY. I could earn closer to 42% APY, but I am too conservative to lever up to 9X with a health factor of 1.03. I want breathing room in case markets get over-utilized and interest rates activate.
Before we get started, please be aware of these risks.
- Smart contract risk in Sturdy, Curve, and Convex
- Systemic risk in DeFi composability
- Stablecoins can depeg
- stETH can trade at a major discount
- Front-end spoof attack on the Sturdy app
- Liquidation if I don’t maintain an LTV below 93% for this ETH position
- Liquidation if utilization rose to over 80% and high interest activates, causing my position to accrue greater debt which leads to a higher LTV
Step 1: First, I can come to the Sturdy app with either WETH or the Curve ETH/stETH LP. For this example, I’ll assume saving some gas by going to Portals on Ethereum Mainnet first to enter the Curve ETH/stETH LP with ETH. I search for the Curve LP on Portals and specify how much ETH to deposit. Below is an example where deposit 5 ETH into this specific Curve LP.
Step 2: Then, I go to theMarkets tab -> Ether Market -> Assets to Deposit and click on Leverage under the Curve ETH/stETH option.
Step 3: Here, I can Leverage by either starting with WETH or my newly acquired Curve LP tokens. I specify leveraging with the Curve ETH/stETH LP (see dropdown menu) and set leverage for this example assuming my Curve LP token won’t go below 0.95 ETH (even though it could go below this for a number of reasons).
I end up with 6X leverage, forecasting 27.58% APY, and I follow the prompts for 3 transactions:
- Allow Sturdy to borrow Curve ETH/stETH for you
- Allow Sturdy to use your Curve ETH/stETH
- Leverage
Step 3: Lastly, here’s the Dashboard where I’m tracking my leveraged position, given interest-free borrowing on Sturdy. I’ll return here in the future to Claim my CRV and (eventually when transferable and if awarded to your market) STRDY yield. I will monitor this daily for fluctuations in the price of the Curve ETH/stETH LP, and in case market utilization goes over 80% where I need to withdraw before interest rates hike on Sturdy.
Airdrop Alpha
In each DeFi Alpha guide, we update a list of DeFi protocols that have yet to announce and/or launch a token.
Gemesis NFT
NFT aggregator Gem has rebranded to OpenSea Pro after being acquired last year.
Past Gem users can claim a free ‘Gemesis’ NFT on OpenSea.
$ARB is Live!
Layer 2 network Arbitrum has launched its ARB token.
Claim your ARB tokens here.
We’ve been tracking Arbitrum ever since last summer’s Odyssey, in addition to tutorials on GMX, Radiant, TreasureDAO and more, so our readers should certainly be eligible!
- Arch Finance – a protocol for comprehensive indices that provide access to differentiated sources of market risk.
- Arbitrum – one of the leading L2s for Ethereum. Claimable now!
- Arrakis Finance – a trustless algorithmic market-maker, for auto-managing Uniswap V3 LPs on Ethereum, Polygon, Arbitrum, and Optimism
- Base – A new Ethereum L2, incubated by Coinbase and built on the open-source OP Stack, that could potentially have a governance token in the future
- DeFi Saver – a one-stop dashboard for creating, managing and tracking DeFi positions across Aave, Compound, Maker, Liquity, and Reflexer
- DeFrag – instant loans for Treasure gaming NFTs on Arbitrum
- Farcaster – a “sufficiently” decentralized social network where users will have the freedom to move their social identity between applications
- Jupiter – The leading DEX aggregator by trading volume on Solana
- LayerZero – An omnichain interoperability protocol, powering popular dApps like Stargate and Radiant Capital. Check out our airdrop guide here.
- Lens Protocol – A decentralized composable social graph, underpinning an emerging landscape of Web3 social media dApps including Lenster, Lenstube, and Orb
- LI.FI – A cross-chain bridge and DEX aggregator protocol
- Liquality – A cross-chain, non-custodial browser extension wallet, similar to MetaMask but with more integrations for swapping cross-chain.
- Magic Eden – The leading NFT marketplace by trading volume on Solana
- Nested – a crypto social trading platform built on Ethereum and other chains
- Opyn – one of the OG decentralized options protocols on Ethereum, with major investors that signal a token has to be in their future. Buy/sell puts or call options to earn a possible future airdrop.
- Orb – one the leading mobile apps for Lens social media
- Phaver – one of the leading mobile app for Lens social media
- Polymarket – one of the strongest players in the DeFi prediction market vertical, bet on an outcome related to crypto, politics, sports and more or add liquidity
- Polynomial – A derivatives protocol built on Synthetix on Optimism, with a newly launched perps trading platform called Polynomial Trade.
- Sense Protocol – A decentralized fixed-income protocol on Ethereum, allowing users to manage risk through fixed rates and future yield trading on existing yield bearing-assets
- Set Protocol – one of the earliest DeFi protocols yet to launch a token for DeFi asset management, popular for TokenSets and known for powering IndexCoop indexes
- Socket (formerly Movr) – their bridge aggregator Bungee moves assets between chains, finding the cheapest, fastest route
- StarkNet mainnet is live! Bridge and swap some tokens for a potential airdrop. Guide here.
- Volmex – Volmex is a tokenized volatility protocol, similar to the VIX but ETHV
- Wormhole – a cross-chain messaging protocol known for bridging between Solana, Terra, Polygon, BSC, Avalanche, Fantom, and Oasis
- Yield Protocol – a newer protocol for fixed-term, fixed-rate lending in DeFi, backed by Paradigm, one might earn a future airdrop by lending DAI or USDC
- Zapper – participate in Zapper trading, lending, providing liquidity, or yield farming; given the Zapper Quests and NFT Rewards program, it can be surmised that if Zapper ever releases a token, this is one way they might do a retro airdrop
- Zerion – The same can be said about Zerion; if they ever release a token, they’re likely to reward those who interacted with their smart contracts swapping, lending, providing liquidity, or borrowing.
- ZigZag – a DEX on zkSync. The airdrop has been distributed. Check your zkSync wallet.
- zkSync – zkSync Era, the first zkEVM is live! Learn about live dApps here and bridge a token to potentially qualify for a future airdrop.
The information contained in this newsletter is not intended as, and shall not be understood or construed as, financial advice. The authors are not financial advisors, and the information contained here is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation. We have done our best to ensure that the information provided is accurate, but neither The Defiant nor any of its contributors shall be held liable or responsible for any errors or omissions or for any damage readers may suffer as a result of failing to seek financial advice from a professional.
