DeFi Alpha: Earn 30% Annualized with Leveraged ETH Vaults by Notional Finance

• Featured Yields: Up to 40% APY on Stablecoins, 6-51% APY on ETH and BTC

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.

• Blur Blows Away OpenSea and Wins 82% of NFT Trading Volume
• Transactions on Arbitrum Leapfrog Ethereum
• Coinbase Jumps Into Ethereum Scaling Race With New Rollup
• Tokenization Picks Up Steam With On-Chain Tesla and Apple Shares
• Stacks’ Token Doubles as Building-on-BTC Activity Surges

Sponsored Post

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Why developers are building with Cartesi:

• DApps are deployed on their own customizable application-specific rollup chains;

• DApps don’t compete with each other in Cartesi’s ecosystem for scarce blockspace;

• Cartesi provides Ethereum or L2’s with orders of magnitude more computational capacity;

• Developers can code decentralized logic with their favorite libraries, compilers and other time-tested open source components;

• DApps preserve the strong security guarantees and censorship resistance of the underlying blockchain;

• Cartesi Rollups opens up the design space for more expressive and computationally intensive blockchain applications;

• Cartesi Rollups can be deployed as a Layer 2 (on top of Ethereum), as a Layer 3 (on top of Optimism, Arbitrum, zkEVM chains, etc.), or as sovereign rollups;

• Reusing existing tooling, having full programmability is a great way to innovate faster without reinventing the wheel!

Follow @cartesiproject on Twitter, join our Discord, or learn more over on our website, cartesi.io

Yield Alpha

Each week we will provide options to earn yield on ETH, WBTC, stablecoins, and other major tokens.

• ETH: 51% APY with pETH/ETH Curve LP staked in Convex via Concentrator
  • This yield is accrued in aCRV + trading fees compounded in the LP.
  • To participate, one must Deposit into the pETH/ETH Curve LP here (not stake).
  • Then, one must stake the Curve LP under the ETH-pETH vault under aCRV Vaults on Concentrator.
• BTC: 6.42% APR with the Curve HBTC​+WBTC LP staked in Convex
  • This yield is accrued in CRV, CVX, and trading fees.
  • To participate, one must first deposit into this Curve factory pool and then stake the LP here in Convex.
• MATIC: 14.3% APY with 50/50 MaticX-WMATIC LP on MeshSwap
  • The yield is backed by validator rewards using the MaticX LSD (5.76% APY) + MeshSwap trading fees + MESH rewards + SD rewards.
  • To participate on Polygon, one may use the Stader MaticX dApp to mint MaticX.
  • Then, deposit into the MaticX-WMATIC pool on MeshSwap and stake the LP.
• ATOM: 23% 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: 19.87% APY with 50/50 BNB/BNBx Ellipsis LP in a Beefy Finance vault
  • This yield is issued in SD, BNB staking yield (thanks to BNBx), and trading fees.
  • On BSC, one can deposit BNB for BNBx here on Stader.
  • Then, one can deposit BNB and/or BNBx here on Ellipsis and stake the BNB/BNBx Ellipsis LP here on Beefy Finance.
• AVAX: 7.05% APY staking AVAX with ankrAVAX by Ankr
  • This yield is issued in AVAX.
  • To participate, one must deposit AVAX for ankrAVAX here on Ankr.
• SOL: 7% 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: 40% APR with the jEUR/agEUR LP staked in Velodrome on Optimism
  • This yield is accrued in VELO.
  • To participate, one must deposit and stake in this jEUR + agEUR LP.

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.

Starter Tutorial

Earn 30% Annualized with Leveraged ETH Vaults by Notional Finance

Given the surging interest in ETH liquid staking derivatives (LSDs), Notional recently launched Leveraged Vaults based on the Balancer wstETH/WETH LP staked in Aura Finance.

These vaults allow users to borrow ETH from Notional, deposit the ETH into the Balancer wstETH/ETH pool, stake the LP tokens on Aura, and then harvest the incentive rewards. Think of it like leveraged yield farming where one can borrow ETH at a predictable fixed interest rate from Notional.

Currently, there are five rewards/fees driving the yield for Notional Leveraged Vaults:

• Trading fees in Balancer

• BAL rewards

• LDO rewards

• AURA rewards

• Underlying ETH staking yield (wstETH)

Leveraged Vaults allow for up to 12X leverage and require a minimum debt of 100 ETH (meaning users might deposit as little as 8.33 ETH at 12X leverage).

With Notional, users can choose from the maturity dates available (currently either May 23, 2023 or June 21, 2023). This means users can only use a leveraged vault through the maturity date, which might also be considered an advantage since settlements at maturity involve debt being automatically closed out against the proceeds of the strategy.

With Notional Leveraged Vaults, liquidation is a risk, and subject to some exchange rate risk as the stETH to ETH exchange rate can vary. If the price of stETH depreciates against ETH, the value of the BPTs one holds in this strategy will decrease, thereby increasing the vault’s leverage ratio, and putting users at risk of liquidation.

Today, I’ll show how I can open a leveraged wstETH/ETH vault with Notional Finance and net a ~7.5% expected yield in just 3 months by depositing a minimum of 10 ETH with 11X leverage. Keep in mind this is an expected yield (total return) of 7.5% between now and May 23, 2023, which is approximately a 30% annualized return!

Before we get started, please be aware of these risks.

• Smart contract risk in Notional vaults (in beta) and Balancer/Aura

• Systemic risk in DeFi composability

• stETH is capable of trading at a discount

• Front-end spoof attack on the Notional app

• Governance attacks on NOTE

• Liquidation risk

• Notional Leveraged Vaults are not available to US citizens

Step 1: First, if I were NOT a US citizen, I would need to decide how much ETH I’ll deposit, knowing that I have to create a minimum debt of 100 ETH so I can use the tools available here on the beta site for Notional Leveraged Vaults to play with how much ETH + how much leverage I need to create 100 ETH debt and maximize Expected Yield while avoiding liquidation.

Here’s an example below depositing 10 ETH with 11X leverage with the maturity date of May 23, 2023, netting an expected yield of ~7.5% between now (February 24, 2023 and May 23, 2023).

Step 2: Next, I click Confirm & Submit Trade and follow the prompts to confirm the transaction.

Degen Tutorial

Earn Up To 84% APR From Trading Fees By Staking VLP On Vela Exchange (Arbitrum)

Vela Exchange is a decentralized perpetuals trading platform on Arbitrum that’s been gaining traction of late, with daily trading volume surpassing $200M for each of the past five days.

The surge in activity could be attributed to an upcoming airdrop of $VELA tokens for users of the platform, so it could be worthwhile to do a few trades.

Vela’s architecture is similar to that of GMX, which we’ve covered in the past. In a nutshell, VLP liquidity providers act as ‘The House,’ profiting from traders’ losses and paying out winning trades. The basic premise is that since most leveraged traders tend to lose money, the price of VLP should rise over time.

VLP can be minted using USDC and staked to earn up to 60% of all protocol fees from opening/closing trades, VLP mints, funding fees and traders’ losses. Note that while VLP is meant to be market-neutral, holding the token still carries some risks:

• Smart contract risk – Vela’s contracts are audited, but as we’ve seen many times, audits aren’t foolproof.

• Counterparty risk – Since it acts as The House, a hot streak of winning trades will adversely affect the price of VLP

One can currently earn up to 84% APR from fees by minting and staking VLP.

Let’s get started.

Step 1: Bridge USDC to Arbitrum

Vela operates on Arbitrum, the leading Layer 2 network by TVL. If you don’t already have assets there, you’ll need to bridge USDC along with some ETH for gas fees.

Using Bungee’s convenient Refuel feature lets you do both in a single transaction.

Step 2: Mint VLP with USDC

https://app.vela.exchange/staking/vlp

Enter the amount you wish to mint and confirm the transaction after approving your USDC.

Holding VLP entitles you to 50% of trading fees. You can then stake VLP to earn additional eVELA rewards, which are vested over six months. As always, please review the project’s documentation before depositing assets.

Airdrop Alpha

In each DeFi Alpha guide, we update a list of DeFi protocols that have yet to announce and/or launch a token.

Blur Airdrop

$BLUR is Live!

If you followed our step-by-step tutorial, you can claim your tokens here.

Treasure Tags

You can now mint your reserved Treasure Tags.

• Arch Finance – a protocol for comprehensive indices that provide access to differentiated sources of market risk.

• Arbitrum –one of the leading L2s for Ethereum

• Arrakis Finance – a trustless algorithmic market-maker, for auto-managing Uniswap V3 LPs on Ethereum, Polygon, Arbitrum, and Optimism

• Aztec – an open source L2 bringing scalability and privacy to Ethereum, with zkSNARK proofs, having launched a private DeFi yield aggregator zk.money.

• 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

• 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.

• 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 newer DeFi derivatives vault creator, built on Optimism

• 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.

• SudoSwap has released details about its SUDO token and airdrop.If you followed our guide from August 12 and created some trading pools, you should be eligible!

• 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 – same can be said speculated 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 criteria have been published. Check your eligibility here.

• zkSync is a Layer 2 scaling solution for Ethereum that uses zero-knowledge proofs to enable scalable low-cost payments. Bridge some assets and do some swaps for a potential airdrop. Guide here.

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.