How to Use EVAA Lending Protocol to Leverage Passive Income on TON

EVAA Protocol is a decentralized lending and borrowing protocol on TON. EVAA brings more liquidity to TON DeFi Ecosystem, enabling users to earn on lending markets or to leverage their existing positions with borrowing.

In this feature, we will explain how EVAA works and how to use EVAA to leverage TON liquid staking rewards by 2x (at the time of writing).

Also, don’t forget to learn more about EVAA’s referral program and evaaXP, which mines for every interaction with the EVAA protocol.

How do decentralized lending and borrowing work?

EVAA lending protocol offers two functions:

• Provide assets to pools, so others will borrow them and pay interest to you.
• Provide assets to pools to use as collateral to borrow assets from others.

Collateral ensures that the lender will get his funds back if the borrower fails to repay or the collateral value drops.

The collateral must exceed the loan amount, hence the maximum amount you can borrow is governed by the Loan to Value ratio (LTV). EVAA’s LTV is set at 70%, which means that for every $1 you deposit as collateral, you can borrow up to $0.7.

Let’s simplify this with an example:

1. Alice deposits 100 USDT into EVAA to earn interest.
2. Bob deposits 100 jUSDC into EVAA and opts to take out a loan. He borrows 70 USDT from the funds supplied by Alice. Additionally, an origination fee of 0.3% is applied to the borrowed amount, which totals 70 × 0.3% = 0.21 USDT.

The total borrowed amount, including the origination fee, then becomes 70 USDT + 0.21 USDT = 70.21 USDT.

The annual interest rate (APR) of 1% is applied to this new total:

• Interest for one year = 70.21 × 1% = 0.7021 USDT.

When it’s time to settle his debts, Bob repays:

• The borrowed amount of 70 USDT.
• The origination fee of 0.21 USDT.
• The interest on the total amount (borrowed amount plus origination fee) which is 0.7021 USDT.
• His total repayment thus amounts to 70 + 0.21 + 0.7021 = 70.9121 USDT.

After repaying, Bob withdraws his initial 100 jUSDC along with the net profit of 9.2979 USDT (10 USDT earned — 0.7021 USDT interest paid).

How to 2x Leverage TON Staking Rewards with EVAA

How to Effectively Double TON Staking Rewards with EVAA

In the realm of TON staking via liquid staking services, participants are generally awarded LS TON tokens.

Tonstakers is one of the leading services in this area, boasting a locked value of $200 million.

Parameters for Leveraged Staking:

• Staking APY: 4.7% — Reflects the annual percentage yield, showing the returns from staking over one year.
• LTV (Loan-to-Value) Protocol: We use 70% of the collateral’s value for borrowing, ensuring safety due to the strong correlation between TON and tsTON which minimizes liquidation risks.
• Origination Fee: 0.3% — This is a processing fee applied to the amount borrowed, paid directly from the loan amount.

Detailed Calculation Steps Across Three Iterations:

Iteration 1:

• Staking: Begin with 102 TON.
• Received tsTON: Roughly 100 tsTON, mirroring the staked TON amount.
• Loan amount: 100 × 70% = 70 TON
• Origination fee: 70 × 0.3% = 0.21 TON (protocol’s fee, goes to DAO pool)
• Total debt: 70 + 0.21 = 70.21 TON
• Amount for next staking iteration: 70 TON
• New Total Capital for Staking: 102 + 70 = 172 TON

Iteration 2:

• Staking: The 70 TON borrowed from the first iteration.
• Received tsTON: Approximately 68.6 tsTON (reflecting a slight conversion loss).
• Loan amount: 68.6 × 70% = 48.02 TON
• Origination fee: 48.02 × 0.3% = 0.14406 TON (protocol’s fee, goes to DAO pool)
• Total debt: 48.02 + 0.14406 = 48.16406 TON
• Amount for next staking iteration: 48.02 TON
• New Total Capital for Staking: 172 + 48.02 = 220.02 TON

Iteration 3:

• Staking: The 48.02 TON borrowed from the second iteration.
• Received tsTON: Approximately 47.06 tsTON.
• Loan amount: 47.06 × 70% = 32.942 TON
• Origination fee: 32.942 × 0.3% = 0.098826 TON (protocol’s fee, goes to DAO pool)
• Total debt: 32.942 + 0.098826 = 33.040826 TON
• Amount for next staking iteration: 32.942 TON
• New Total Capital for Staking: 220.02 + 32.942 = 252.962 TON

Calculating Annual Income After Three Iterations:

• Annual Income from Staking: 252.962 × 4.7% ≈ 11.8891 TON

Comparison with Single Staking:

• Single Staking of 102 TON: 102 × 4.7% = 4.794 TON
• Ratio of Leveraged Staking Income to Single Staking: 4.794 / 11.8891​ ≈ 2.48 times

Thus, through the EVAA platform, leveraging significantly enhances annual earnings to about 11.8891 TON, which is approximately 2.48 times higher than the yield from simple staking.

This strategy effectively doubles the income by using a conservative leveraging approach, ensuring safety due to the interlinked prices of TON and tsTON, which mitigates the risk of sudden collateral liquidation.

Always DYOR and double-check rates before leveraging staking positions or other positions in DeFi.

Manage your risk wisely

Liquidation is the lending protocols’ last line of defense. If collateral value drops, the protocol has to liquidate it to repay the loan and won’t allow liquidity providers to suffer losses.

EVAA triggers collateral liquidation when the borrowed asset’s value grows to more than 75% of the collateral. Should this occur, EVAA will allow anyone to liquidate the collateral to repay the loan and take 12% of the collateral as a reward.

tsTON token’s value is pegged to TON and raises through time, so the liquidation risk for borrowing TON with tsTON is minimal. Still, the future slashing optimization might socialize the slashing penalties to liquid staking services and negatively affect liquid staking tokens’ value. It is better not to be greedy and not to utilize 100% of your tsTON collateral to reduce liquidation risks.

A guide on how to leverage TON staking with EVAA

Now illustrated!

To leverage the staking position you have to stake TON first. To do so, you may go to Tonstakers and stake TON there. By doing so you’ll receive tsTON to use as collateral in EVAA. When you have your TON staked and tsTON in your wallet, navigate to EVAA and connect your wallet.

Click on tsTON in the left column to deposit tsTON and later use it as collateral.

On tsTON pool’s page, click the purple Supply button and supply tsTON from your wallet. It says Supply more in our screenshot because we supplied tsTON before to verify our calculations.

Return to EVAA main page, then click on TON in the right column to open the borrowing interface.

Click on the Borrow button to open the borrowing panel, then choose how much TON you want to borrow. Considering the tsTON is backed by TON, one can click 100% to borrow the maximum amount, as the tsTON is unlikely to depeg and the liquidation risk is minimal. Click the Borrow button and confirm the transaction in your wallet.

Go to Tonstakers and stake TON you borrowed.

Congrats, you have now leveraged your staking position by 3x! If you want to earn more, repeat these steps to leverage tsTON you received for staking borrowed TON.

Conclusions

Crypto enthusiasts can use lending markets to leverage their positions in DeFi protocols, including TON staking. With current EVAA rates, you can achieve 2x leverage or even more by iterating the borrowing process.

Leveraging will work if borrowing rates are lower than APY the user will get on borrowed assets. If borrowing rates are higher, than you’ll pay more interest than earn from staking.

FYI: this is not financial advice but just an illustration of using the protocol. Always do your own research and calculations and do not invest more money than you can afford to lose.