weETH RR Vault
The Strategy
The weETH recursive restaking strategy aims to amplify weETH’s restaking yield by leveraging (6.5x) the amount originally deposited by recursively borrowing wstETH, using AAVE as the core lending platform, and 1inch as the core swap aggregator.
Users can only deposit/withdraw weETH
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 + Restaking yield APR (ether.fi points) + Supply APR
The negative yield comes from the Borrowing rate APR
The equation goes as follows: Total APY = 6.5 x (wstETH Staking Yield + weETH Restaking yield APR + weETH Supply APR) - 5.5 x (wstETH Borrow Rate)
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.
Workflow
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 wstETH = 1 weETH:
I. Deposit (e.g. 1 weETH)
Deposit 1 ETH（weETH） in AAVE V3 lending market;
Flashloan 5.5 ETH(wstETH) from Balancer (leveraged 6.5x);
Swap the flashloaned 5.5 ETH(wstETH) in 1inch to receive weETH, thus extra staking yield, restaking yield and etherfi points;
Deposit the extra 5.5 ETH(weETH) in AAVE V3 lending market;
Using 6.5 ETH(weETH) as collateral, borrow 5.5 ETH(wstETH) to repay the flashloan.
The user ends up with 6.5 weETH supplied, and 5.5 wstETH borrowed.
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 weETH 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 weETH)
Having 6.5 weETH as collateral and 5.5 wstETH borrowed, to return user’s assets, the wstETH borrowed first has to be repaid. To do so, first withdraw a small part of the collateral (e.g, 0.5 weETH);
Swap 0.5 weETH to 0.5 wstETH on 1inch;
Repay 0.5 wstETH from the active debt;
Repeat steps 1, 2 & 3 multiple times until all the debt has been repaid, leaving 1.1 weETH as collateral.
Withdraw the remaining collateral. 1.1 weETH withdrawn to user's wallet, or, swap weETH to wstETH, and then send this wstETH to user’s wallet.
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