Oct 25, 2022
Strategies Liquid Staking 20–34% APY (Token/stToken)
Low risk, high reward!
Liquid staking removes the drawbacks of traditional staking methods. In liquid staking, once you deposit (stake) your native tokens on the platform, you receive an st token that represents their staked tokens on a 1:1 basis. For example, if a user stakes 2 ETH tokens, the user will receive 2 stETH tokens.
Liquid staking comes as an innovative alternative to sidestep risks associated with illiquidity, complexity, and centralization.
A user would deposit their ETH into a third-party application. This app would deposit this user’s ETH into the Ethereum deposit contract for them (through the use of running their own validators), and in return would mint a representative ETH token for them (eg. stETH).
This representative token will thereby let users maintain their ETH liquidity, allowing them to transfer their ETH wherever they desire — all while still earning Ethereum staking rewards.
Strategy Liquid Staking (Token/stToken)
It is the best of both worlds: Staking and DeFi
Where to start?
DeFiLlama put together quality information about each Defi Tool within blockchain networks. It could help us to choose which Liquid staking is performing better to compare its Total Value locked (TVL) in the ranking.
- Choose a non-custodial liquid staking protocol — (Marinade Finance)
2. Choose a Blockchain Network — (SOLANA)
Marinade Finance
Stake SOL → 5,68%*
Another way to boost your gains above and beyond simply holding SOL is to stake it directly back with Marinade in their MNDE stake vault. At the time of writing, the APY for staking SOL is 5,68%*. Marinade shows us the constant growth of its TVL.
Risks: This option carries no major additional risk over simply holding SOL. If you do not plan to take risks in other major protocols, this option is a really great one.
3. Stake your SOL Tokens then your get mSOL to use in different ways.
Strategy 1 — Liquidity Pool
When providing liquidity to a pool, you must provide both tokens that the pool is creating liquidity for. For example, if you are considering providing liquidity in an mSOL/SOL pair you would have to have an equivalent amount of SOL and mSOL. What this means for providing stake pool tokens to a liquidity pool is you are possibly missing out on half of the gains from mSOL due to the other side of the Pool not increasing in value.
- Go to nanoly.com
- Look for information about mSOL
3. Chose the LP (mSOL/USDC).
4. Then you go to Raydium and add liquidity.
The APY usually is above 9% which is good, but in this case, it is gonna be 16% Then, you already have 5,68% of the stake in Marinade.Finance + 16.26% LP = 21,94% annual.
Strategy 2 — Loop Strategy
What is looping?
Looping on a lending platform refers to the process of maximizing your total utilization by building up a larger and larger collateral supply and borrowing balance. For the example below, we use 75% Loan to Value and a starting supply amount of $1000.
mSOL = Asset A ; SOL= Asset B
- Supply Asset A: $1,000 Supply Collateral Total
- Borrow Asset B up to max utilization: $7,50
- Convert Asset B to Asset A: $750
- Supply Converted Asset A: $1750 Supply Collateral Total
- Borrow Asset B up to max utilization: $562
- Convert Asset B to Asset A: $562
- Supply Converted Asset A: $2312 Supply Collateral Total
- … etc.
The APY is under hypothetical lending scenarios.
For this example, we are making 10 loops, giving us an APY of 34%. We can use cogentcrypto to have an idea of how our is gonna work our loops.
This calculator has a heavy focus on liquid staking token lending but any token can combination can work. While the data is gathered from Solend.fi, you can fill the values in manually from any lending platform.
Holding crypto thesis.
I explain to you that another way to boost your gains above and beyond simply holding SOL tokens is to stake it directly in a non-custodial liquid staking protocol where you could make a 20–34% annual with one of the two strategies.
Also, I talked about the importance of the non-custodial liquid staking protocols and how they are changing the game in the DeFi Space.
Finally, I show you step by step how to develop those strategies by yourself.
