wstETH RS Strategy Vault
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The aims to amplify wstETH’s staking yield by leveraging (6.5x) the amount originally deposited by recursively borrowing ETH, using AAVE as the core lending platform, and 1inch as the core swap aggregator.
Users may choose to deposit ETH or wstETH. The same choice applies upon withdrawal.
This strategy's total APY is equal to the differential between Positive yields minus the borrowing rate.
The positive yield comes from the Staking yield APR + Supply APR.
The negative yield comes from the Borrowing rate (APR).
The equation goes as follows: Total APY = 6.5 x (wstETH Staking Yield + wstETH Supply APR) - 5.5 x (ETH Borrow APR)
Important note: This strategy incurs swap fees upon creation and withdrawal (due to gas fees & swap slippage, mostly incurred upon withdrawal). Therefore, a breakeven time applies. Depending on the on-chain swap rate and strategy APY, the breakeven time may vary from 5-15 days. Users shall be informed before depositing in the vault.
The following workflows present the step-by-step processes taking place in the backend upon users’ deposit/withdrawal. All respective steps {A-F} are automatically executed within 1 block transaction. For the sake of clarity, let’s assume that 1 ETH = 1 wstETH:
I. Deposit (e.g. 1 ETH)
Stake 10 ETH in LIDO to receive 10 wstETH & passive staking yield, or swap ETH for wstETH on 1inch (CIAN will automatically select whichever approach is more cost-effective) ;
Deposit wstETH in AAVE V3 lending market;
Flashloan 20 ETH from Balancer (leveraged 3x);
Stake (or swap) the flashloaned 20 ETH in LIDO to receive wstETH, thus extra staking yield;
Deposit the extra 20 wstETH in AAVE V3 lending market;
Using 30 wstETH as collateral, borrow 20 ETH to repay the flashloan.
II. Yield
Once the position is created, no further transactions are necessary for the yield to be generated*. As long as the borrowing rate doesn’t surpass the staking APR, the strategy will keep generating returns. Since the staking APR comes from Ethereum’s validation fees, unless Ethereum dies off, it is very unlikely to see this strategy become irrelevant. * The only extra execution possible is the readjustment of the collateral ratio in case of an extreme market crash. If the price of wbETH was to deppeg from ETH, this might cause a risk of liquidation to any active leveraged stakers. To prevent this risk, CIAN’s vaults come equipped with a liquidation protection mechanism that can partially deleverage the vault to counter liquidation. This specific mechanism is one of the prime reasons why institutions choose CIAN as an investment tooling platform.
III. Withdrawal (e.g. 1.1 ETH)
Having 6.5 wstETH as collateral and 5.5 ETH borrowed, to return user’s assets, the ETH borrowed first has to be repaid. To do so, first withdraw a small part of the collateral (e.g, 0.5 wstETH);
Swap 0.5 wstETH to 0.5 ETH on 1inch;
Repay 0.5 ETH from the active debt;
Repeat steps 1, 2 & 3 multiple times until all the debt has been repaid, leaving 1.1 wstETH as collateral (profit: 0.1ETH).
Withdraw the remaining collateral. 1.1 wstETH withdrawn to user's wallet, or, swap wstETH to ETH, and then send this ETH to user’s wallet (if the user prefers receiving ETH).
For a more detailed flowchart of operations, please check:
