METER UP your Stablecoin yield — Sumer Money arc!

We are excited with the launch of Sumer Money on Meter Network!

Sumer is a Cross-chain Synthetic Assets Money Market Protocol, deployed simultaneously on a network of supported chains.

Sumer enables creation of SuTokens (Synthetic Assets of USD, ETH and BTC) to provide a credit card-like experience to users. As a DeFi user, you can deposit your assets (ETH, BTC, USDC, USDT etc.) on the native blockchain in the lending and borrowing market to mint synthetic assets (SuUSD, SuETH, SuBTC) that are fungible across the network of all supported blockchains.

STRATEGY OVERVIEW

There are key design elements of Sumer and Meter Network which enable the DeFI user to leverage this interest rate arbitrage strategy. Let us understand the individual elements of this profitable strategy;

The Strategy

Step 1

Deposit any of the supported asset (USDC, USDT, ETH, wstMTRG) within Sumer

Step 2

Borrow MTRG from the protocol within safe limit

Step 3

Deposit MTRG into the liquid staking (stMTRG) module on Meter Network

Step 4

Wrap liquid staking (wstMTRG)

Step 5

Deposit wstMTRG into Sumer to increase borrowing power

Step 6

Borrow additional MTRG from Sumer to lever up the yield

Step 7

Perform as many loops based on your risk appetite

Interest Rate Arbitrage

This strategy is enabled due to the interest rate arbitrage available between;

MTRG borrowing Interest Rate in Sumer Protocol

This follows Jump Kink Interest Model where the borrowing interest changes based on pool utilization

Staking yield on Meter Network

This is currently ~10% and compounded daily through liquid staking

Key Enablers (Sumer and Meter Network)

Asset Grouping

Sumer introduces a concept of homogeneous and heterogeneous asset group classification. This design lets users maximize capital efficiency when collateral and borrowed assets are correlated in price, liquidity and risk (homogeneous in nature).

In our strategy, even though MTRG has highly volatile asset with conservative LTV (30%) to borrow heterogeneous assets (USDC, USDT, ETH), the homogeneous nature of MTRG and wstMTRG enables with the group (MTRG, wstMTRG) borrowing at higher LTV (80%).

Markets on Sumer .Money

MTRG and wstMTRG Correlation

stMTRG is a 1:1 representation of MTRG within liquid staking. When a user wraps stMTRG, the stMTRG/wstMTRG rate is dependent upon the stMTRG available within the contract and the wstMTRG already issued and changes daily with liquid staking yield every 24 hrs. This high correlation between MTRG and wstMTRG makes MTRG borrowing with wstMTRG relatively safe position!

YIELD POTENTIAL

As mentioned earlier in the interest rate arbitrage segment, the yield potential is as below;

We have not considered the any impact of income from USDC lending and wstMTRG lending for sake of simplicity.

The key drivers of Interest are;

Income from Staking Yield

1. Daily MTRG Emission (Increases with higher emission)
2. Total MTRG Staked (Decreases with higher Total MTRG Staked)
3. Borrowing Limit Utilization (Increases with higher borrowing limit utilization)
4. Number of loops (Increases with more loops/ leverage)

Cost of Borrowing MTRG

1. MTRG Pool Utilization (Increases with higher pool utilization)
2. Number of loops (Increases with more loops/ leverage)

Factoring the drivers of interest mentioned above, we can find the potential Annualized Returns for different combination of number of loops, Borrowing Limit Utilization and MTRG Pool Utilization in the heatmap below.

The overall observation is that the potential yield from this strategy increases with;

Lower MTRG Pool Utilization

Higher Borrowing Limit Utilization

Higher Number of Loops

This is also evident from the stacked heatmap below;

Remember: The Collateral Rate utilization depends on risk aversion of users. Risk Averse users should choose lower borrowing limits. Users need to be careful against liquidation potential while utilizing higher credit limit.

TUTORIALS

Bridging Stablecoins to Meter Network

Adding Custom tokens to MetaMask

Getting MTR (gas) for transactions

Supplying USDC/ wstMTRG on Sumer.Money

Borrowing MTRG on Sumer.Money

Liquid Staking MTRG and wrapped stMTRG

The Meter Ecosystem Tutorials: LIQUID STAKING

RISKS INVOLVED

Reduced health factor in the user position can subject the collateral being seized in liquidation

IMPORTANT NOTE

This guide is not to be construed as financial advice. There are lot of moving parts and users are cautioned to review their position periodically.