Tetu’s architects bring the innovation of folding strategies to Yield Farming.
In the early days of Yield Farming Crypto enthusiasts were surprised to learn that you could deposit your assets into the Compound, take out a loan, deposit the amount you borrowed again to make a smaller loan and deposit again and so on until you reach the limit.
Through this practice, it was possible to leverage loans and deposits to collect even more COMP tokens. The problem is that you had to do a lot of transactions in this process. And with the increase in GAS, it is not feasible to do this individually unless the amount of assets justifies the operating costs.
However, with the current new GAS solutions such as Polygon and other alternative networks, financial creativity has become viable again. The Polygon Protocol that allows the development of the Folding strategy is Iron, a great partner of Tetu and this partnership between Tetu and Iron was further strengthened with the development of the folding strategy.
How the folding strategy works
Let’s say you would supply $100 USDC and Borrow $70 USDC. This value is put into the strategy and depends on borrow limit (100% of borrow limit — 1%) so you supply that $70 and you can borrow again, then you borrow $50 and supply $50 and then borrow $35 and so on repeating the process until If you can borrow a reasonable amount of assets, this process is repeated for no more than 20 loops. This process is called Folding and through Tetu it is possible to participate in the Folding strategy with the simplicity of a few clicks.
Profitability is calculated by a formula when you borrow where the profit from the strategy and the profit from the supply of borrowed money is positive. When folding is not profitable the strategy will repay all borrows and will only supply money for the market.
Folding strategies risks
There is no liquidation risk because there is no price fluctuation due to the folding strategy using the same assets for borrow and supply.
If there is not enough liquidity in the market to withdraw, the user will not be able to withdraw from the vault either.
Incentives
The APR vault does not depend on the profitability of the strategy. Folding strategy vaults are being incentivized with xTETU rewards in a rough forecast of profitability.
What do you have to do to participate in the folding strategy
Search for Iron Lending in Tetu to filter the available folding strategy vaults. So you just have to approve the asset of the strategy you want to participate in and deposit the asset.
