If you are an experienced DeFi user, you may be wondering what makes Steadefi stand out from other yield protocols and aggregators.
Vaults Catering to Various Risk/Reward Profiles
Users looking for safer and more stable, guaranteed returns on a single asset (an “ETH maxi” for example) would suit being a lender in a lending vault.
Users looking for higher and riskier leveraged yield generation would suit being a depositor in a strategy vault, which is able to borrow assets in an under-collaterised manner for the most capital efficient leveraged yield generation.
Capital Efficient, Under-Collaterised Lending
As Steadefi’s Strategy Vaults borrow assets from Steadefi’s Lending Vaults and not from external lending protocols, strategy vaults are able to borrow assets in an under-collaterised way. This means that all assets being deposited are done in the most capital efficient manner.
Long, Neutral and Short Delta Strategies
Most leverage yield protocols provide only a Delta Long strategy. As such, yield APR/APYs may be high, but if the underlying asset that you holding to earn yield on drops in value, more often than not the yield earned does not exceed the value lost due to the underlying asset value decreasing.
Steadefi’s vaults offer DeFi users different strategies to earn yield based on their risk profile and market outlook.
Users looking for higher and riskier leveraged yield generation would suit being a depositor in a strategy vault, which is able to borrow assets in an under-collaterised manner for the most capital efficient leveraged yield generation.
Users looking for higher and riskier leveraged yield generation with the outlook that asset prices will be going up would suit being a depositor into a 5x Delta Long strategy vault.
Users looking for more passive yield generation for a slightly longer period of time while trying to hedge out price movements both-ways (because they are not sure on whether the market is bullish or bearish), would suit being a depositor into a 3x Delta Neutral strategy vault.
Ultimately, there is a strategy that caters to a depositor’s market outlook (bull, bear or crab) to allow depositors to earn yield profitably.
Profit Sharing for Lenders
Previous generations of lending-borrowing protocols rely on high utilisation rates in order to provide any worthwhile returns for lenders.
High utilisation, however, suffers both from liquidity withdrawal risks and unpredictable returns as new lenders typically move in to capture those higher rates. Additionally, if utilisation is low, lenders have little reason to provide liquidity.
Steadefi’s lending vaults implement profit sharing rates on top of existing utilisation rate model, allowing lenders to be able to earn higher yields by increasing borrowing fees when strategy vaults are earning higher yields, regardless of the vault’s utilisation.
No Negative Yields for Borrowers
In most leveraged yield protocols, when yields are low while utilization of lending assets are high, borrowers run the risk of “negative yields” (in the form of negative APRs). This essentially means they are losing assets on their positions as they are paying too much in borrow fees (overleveraged) while earning less yield.
Steadefi’s profit sharing rates allows for no negative yields for strategy vaults. In return for sharing a portion of their yields to the lenders, strategy vault users will always pay a borrowing rate that is below the yields they are earning from executing on their strategy.
No Full Liquidations with Automated Monitoring & Rebalancing
When yielders seek higher yields through leveraged positions, market movements against their position can lead to full liquidation, which can result in a total loss of all their deposited assets.
Steadefi runs keepers which monitors the health parameters of all strategy vaults 24/7. Whenever a parameter — such as a strategy vault’s debt ratio or delta — falls out of a strategy’s determined parameter range, a rebalance is triggered.
This means that there is no “full liquidation’ to a depositor’s deposits in a strategy vault, as frequent rebalancing will take care of any adjustments required to keep the strategy vault’s within acceptable and healthy (relevant to the strategy) parameters.
Reduction of Complicated or Tedious Position Management
Most leveraged yield protocols require their investors to manually set up their own positions while manually monitoring and rebalancing them to prevent full liquidation.
A delta-neutral or short position can also be tricky to implement, with proper calculation and rebalancing needed to ensure a delta-neutral strategy is properly executed over time.
Additionally, a re-compounding of earned yield may be required for the most capital efficient yield generation.
These can be both time-consuming and overly-complicated for users.
Steadefi’s strategy vaults and keepers automate all such calculations and processes. Yields gained over time are automatically compounded into the principal, allowing our investors to simply deposit and relax.
Better Lending Risk Segregation with Isolated Lending Vaults
Most leveraged yield protocols have a communal lending vault/pool that lends out assets to borrowers that execute on different strategies with different risks, while being charged the same lending rates. The lending rates are usually based purely on the lending vault/pool’s utilisation.
This results in a mismatch of risk/return for lenders as all lenders looking to lend out an asset can only do so to one communal lending vault/pool.
If a particular borrower or strategy vault encounters a bad debt situation, all lenders in the communal lending vault/pool are affected. Similarly, if a borrower or strategy vault decides to utilise (borrow) all available lending assets, the liquidity risk is shared across all lenders as well.
We believe that this is a mis-match of risk/reward that stems from lenders not having the ability to better determine what their assets are being lent out to and for.
Steadefi implements isolated lending vaults that lend out assets only to a particular set of strategy vaults. This isolates the risk and return of lending assets to a particular protocol and even more specifically, a particular yield source within the protocol, giving lenders the option to where and how they want to lend out their assets to specifically.
Admittedly, this results in more choices and options for lenders (for example, there are numerous USDC Lending Vaults catering to the different yield sources that uses USDC), but we believe that this offers lenders who are more discerning to risks to have better control of where and how their assets are earning yield while being borrowed.
In the future, Steadefi will also look to build aggregator lending vaults that will deploy an asset (e.g. USDC) across all lending vaults of a similar asset (or specific aggregator lending vaults for higher risk and higher returns, etc.) to cater to lenders who are keen for more convenience.
Obfuscated Profit and Loss Despite High Yields
In order to secure TVL, many leveraged yield protocols advertise high rates of return (APYs) at that moment in time.
However, despite the high yields, many depositors are still not profitable.
This could be due to the high returns being high temporarily but low most of the time, to simply because the yields earned are not enough to outpace the fall in asset value (in a Delta Long strategy).
This means that investors are unable to predict what their yields may be in the long term, in addition to feeling "misled" by returns that end up below the original target.
Steadefi wants to provide more clarity and information on the performance of the vaults. Our front-end user interface aims to provide both real-time and historical yield rates as well as profit and loss data, so depositors can better follow and analyze how the vaults are performing against market movements.
