New new Sweep rate at 21%

The Sweep interest rate jumped up to 21% this weekend.

Sweep also released a balance sheet spreadsheet that shows the status of assets and AMMs.

If rates stay consistent (not likely) and transaction costs are manageable (achievable with L2s and bigger scale), then the protocol will make about a 4% return on assets in this configuration. That’s a good margin in a market where banks with much longer maturities make about 3%, and money market tokenizers make about 0.3%.

Sweep delivers and stabilizes this rate with allocation, capital, and fees.

Allocation

The biggest underlying allocation for new money is to Ethena, which is currently paying more than 29% for a 7 day lockup.

Sweep also needs assets that are liquid in one block, to satisfy redemption demand. It keeps reserves of Silo on Arbitrum (reliably paying about 19%) and USDC in the SWEEP/USDC AMM pools.

High interest rates in DeFi are driven by demand to borrow money to buy crypto with leverage. Sometimes people do not want as much crypto, driving down borrow demand and rates. We do not expect DeFi and Ethena to continue to deliver these high rates for a long time.

We are continuing to add DeFi strategies on a variety of chains, including new chains with boosted yield. If DeFi cash management gets big enough, Sweep can allocate into tokenized securities that draw on the big off-chain money markets. This will help Sweep deliver on its promise to allocate to the best bets in DeFi and CeFi as the business cycle changes.

Capital for risk

Sweep uses two parameters to stabilize the economics:

• Capital for risk: Minimum equity (junior tranche/margin/capital from the borrower) is set according to the volatility of the margined asset and asset returns. Capital protects from declines in asset value
• Fees for liquidity: Fees assets that take time to redeem can pay for liquidity that is reserved for fast redemption.

Sweep stabilizes yield and protects SWEEP holders by requiring capital from borrowers that can absorb falling yields and some losses. The Ethena capital requirement is 10%. The requirement for USDC held in AMM pools is less than 1%.

Fees for liquidity

Ethena uses a 7 day lockup. In order to help users that want to sell SWEEP at any time, Sweep needs assets that can pay back in less time than 7 days, and even in one block. These assets will also pay a lower rate. In this allocation, we are using Silo and USDC. The key to making this work is that the protocol is charging a 2% fee to the Ethena stabilizer.

A Stabilizer fee pays for liquidity by subsidizing assets that are more liquid, but earning a rate less than 21%.

Why Sweep?

Sweep is designed to provide embeddable USD yield for protocols, AMMs, wallets, and AI.

• It is available on multiple blockchains, bridges, and AMMs
• It is easy to bridge and embed. It does not rebase. It does not require staking, games, or points to deliver competitive yield
• It is designed for long-term embedding in protocols that expect competitive yields throughout the business cycle. It can allocate to DeFi on an expanding list of chains (currently the top 7 EVM chains). It can allocate to tokenized money market funds with huge capacity
• The rate is stabilized weekly
• Wholesale borrowers provide capital and allocation

Get SWEEP through your local AMM or aggregator, or through the Sweep app.