AllowedList Alpha: LIDO. Fire meets Water. Leveraged LSD x10!
After months of devs being locked up to complete V2, we are now one week away from the launch of V2 — and what better way to get through the countdown than with giving away the final alpha pieces on our integrations? The article will cover how Lido Finance integration adds to the protocol, alpha on how the upgrade makes it super easy to deploy a strategy, the strategies you can expect, the APYs you can expect and a smol new UI teaser.
No more waiting — allow us to introduce the penultimate addition to our adapter integrations for V2, the boss of liquid staking — Lido Finance.
But before we proceed, we should let you know that all of the integrations we have introduced or are about to introduce, are subject to DAO voting. The discussions are already live and the GIPs are likely to go live on 20th October and implemented just before V2 launch on 27th.
Gearbox X LIDO: How does it work?
With the Gearbox integration, you’ll be able to lever up as per your risk and debt [borrowed] asset preference to get access to true leveraged staking… But that’s just the tip of the iceberg. Beyond the leveraged ETH, it’s the stETH you receive that enables composability across multiple more DeFi protocols. And each protocol enables you to earn even more APY.
So what can you potentially do? One of the ideas:
Leverage borrow ETH on Gearbox -> stake in Lido to get stETH [or just buy it]-> add to the main Curve stETH pool -> get LP tokens -> stake those in Convex or Yearn.
AAAA!! Lots of protocols, lots of composability… and a lot of complexity? NO! Devs thought this out too. There is an easy way:
Multicall + Smart Router: One-Click Strategies
One-click strategies do what the name suggests: open leveraged positions in your preferred pool/vault/protocol in just one transaction. Multicall feature of Gearbox essentially bundles all the complex [swap->LP->deposit] operations into just 1 transaction, also saving you a bunch of gas.
As for the Strategies page specifically, it does even more: it lets you go from having no Credit Account -> to having a Credit Account open and already aping into a strategy you choose. You choose the leverage, the debt asset, the risk… And you can always ape out as easily!
- Choose your debt [borrow] asset
- Choose your collateral(s) which can be multiple
- Choose your leverage factor x
- Choose where you want to ape in
YOU decide where & what to ape in, how long to stay in, and your risk exposure. Cross-collateral, delta-neutral, all of these choices are up to your liking!
Single click strategies use a Smart Router [our pathfinder] to find the most efficient manner to get the assets for a strategy while Multicall ensures that efficiency turns into execution in one click. It saves you the time & gas from doing all of the steps by yourself. Let’s see what that is:
ALPHA: instant strategies to expect initially.
A lot of strats below are based on integrations we have already introduced:
* Want to know how to earn ~20% APY on Yearn, go here.
* Prefer Curve pools? No worries, go here.
* Want to learn about Frax can do with Gearbox? Here.
1. Pure leveraged staking yields in stETH
The stETH is what you receive when you stake ETH, with the ability to deploy directly on the LIDO protocol. At the moment, there’s about 5.9B$ of ETH staked on LIDO with stETH trading at 0.995ETH. stETH ideally is supposed to maintain a peg against ETH but market conditions can make it lose peg which can lead to your health factor dropping, this has previously happened and you should manage your risk accordingly.
TIP: this strategy to just passively hold stETH could make sense if you borrow ETH on leverage as the debt asset, and its borrow APY is low. Or if you go long ETH by borrowing stables as the debt asset and buying ETH, but instead of holding idle ETH you hold stETH which grows in number.
But there is even hotter stuff…
2. Convex stETHCrv
Convex Finance allows users to stake steCRV LP tokens into their vault, to farm LDO, CVX, trading fees, as well as boosted CRV rewards — without the need for users to lock-up CRV themselves. This is on top of the staking APY of stETH (the portion that remains as stETH inside the Curve Finance pool). At the moment the APY on the same is 5.59% which enables a healthy source of yield on your directional trades.
3. Yearn stETHCrv
The Curve stETH yVault is one of the highest TVL yearn vaults (~$115m), and for good reason — the APY currently stands at 6.58%, which is pretty good for an ETH farming strategy. In comparison, the vanilla WETH yVault is currently yielding 0.47%. Yearn has very similar sources of yield to Convex but unlike convex it sells off the rewards earned to then redeposit ETH/stETH into the vault.
4. Curve stETH
The Curve stETH is one of the highest TVL vaults (~1.6B$) in DeFi, and for good reason — the APY currently stands at 3.36%, which is pretty good for an ETH farming strategy. The Curve stETH Pool takes Lido stETH (liquid staked ETH), puts it in a curve pool with vanilla ETH. You earn the overall yield through 3 mechanisms and then levered up:
- Yield from ETH Staking
- Yield from trading fees on the curve pool
- Yield from Curve token emissions
- Yield from Lido token emissions
The above strategies and assets are not limited in any manner, new assets and contracts can be added to the AllowedList at any time (as long as the code has been written + it goes through governance approval). So if there’s an asset that you want added to the Gearbox AllowedList, let us know in discord, or even better, start building it yourself as a contributor for a grant!
So what APYs can I expect?
Taking an example of the Convex vault for stETHCrv LP tokens, with the current APY of 5.55% along with an assumed borrow rate of 2.08%(Assumed as same as AAVE), we get the below as the likely APYs across leverage levels.
This potentially makes the Convex stETHCrv one of the highest APY plays on V2!
Once again, we’ll stress that this strategy carries risks. For example, in the event of a significant depeg between stETH and ETH, you could quite end up being liquidated at 7x leverage. Back of the napkin math shows that if the depeg is > ~6% (e.g., stETH goes to 0.94 ETH, which has happened in the past, then you are at risk of being liquidated).
At a 5X leverage though, liquidation till a 14% depeg at similar ETH prices can be sustained. Making 5X a relatively safer bet and still earning 23% APY.
TEASER: The LIDO Adapter
While single click strategies mean that there is no need to manually go to a protocol to deploy a position, here’s a small how-to with our brand new UI based guide below in case you want to.
- Open an ETH Credit Account and lever up to get additional ETH to your account. You can manage your risk by looking after your Health Factor.
TIP: you can use any of the possible assets as collateral (like stablecoins), or even have a different debt asset. However, LTV for ETH-to-ETH borrowing is naturally higher, so your leverage can be as high as 9x. If you go with stables as collateral, you might have a directional ETH exposure (either short or long) — but maybe you want that? You decide!
2. Move to the “Connect” tab and log on to the LIDO adapter as shown below with Wallet Connect. With that feature, you can use the original Lido interface you have already been used to.
3. Press connect and you are done, your Credit Account will now effectively connect to the LIDO website like a smart wallet and you can use your ETH to stake as show below:
And that’s how you use the UI in case you don’t want to use the super quick and extremely convenient single click strategy.
TIP: you can also just use Farm and Trade tabs inside the Credit Account view to save yourself time. For stETH, you can simply buy it via Trade tab, while vaults are available on the Farm tab regardless of the assets you currently hold inside your Credit Account. Smart Router will help you!
Summarize it for me, Sensei!
- In the near future, Gearbox DAO will have the opportunity to add LIDO as an adapter and stETH as an asset and collateral, broadening the choices of yield strategies available to users. More are possible soon after as well.
- With composability the DeFi strategies can be played out w leverage across protocols like Curve, Yearn and Convex to maximise yields.
- This new addition is a crucial part of Gearbox’s goal to enable a leveraged composable DeFi ecosystem.
- Rough calculations suggest up to 26% yields with these new methods!
If you would like to learn more — just get involved on Discord. Discuss, research, lead and share. Call contributors out on their bullshit and collaborate on making things better. Here is how you can follow developments:
- Main website: https://gearbox.fi/
- General Docs: https://docs.gearbox.finance/
- Developer Docs: https://dev.gearbox.fi/
- Mainnet dApp: https://app.gearbox.fi/
- Governance Forum: https://gov.gearbox.fi/t/start-here-forum-rules/
- Blog: https://medium.com/@gearboxprotocol
- Snapshot: https://snapshot.org/#/gearbox.eth
- Github: https://github.com/Gearbox-protocol
- Twitter: https://twitter.com/GearboxProtocol
- And, of course, the DAO notion pages:
