Sturdy, being a protocol for providing borrowings minus any form of interest and increased lending capacities, is surely turning out to be a game-changer. In layman’s language, this is achievable simply by taking collateral from the borrower and passing it on to the lender.
At the beginning of June, Sturdy launched on the Ethereum mainnet. For a start, Sturdy used Curve LP tokens as collateral, with Convex staking on the backend.
Till now, only Base Curve APR was the earning of a borrower against Curve LP supplied by him in the form of collateral. The lender gained every other kind of reward offered by Convex staking. Therefore, and correctly so, it made little sense for any borrower to supply Curve LP tokens as collateral on Sturdy. The reason is the low base APR.
However, the latest integration of Sturdy is responsible for the complete scenario change where the borrower is concerned. Now it will have the option of using Curve Iron bank LP tokens (ib3crv) as collateral.
Proving the declaration of enormous change, depositing ib3crv, the borrower will now be entitled to receive both the full Base Curve APR and 75% of all CRV rewards. These benefits being received from Convex staking will amount to 5.16% APY. Combining this with an LTV of 90% and interest-free loans for the borrower will level up 11X, making the corresponding earnings over 56% APY.
All of this will be above and beyond the deposits in Iron Bank’s lending market, generating its amount of yield.
As is now amply understandable and acceptable, the risk factor connected with Leverage was high by any standards. Fortunately, this will be an issue of the past. In this scenario, the borrowed assets, as well as the collateral, being stablecoins, the risk factor becomes negligible, if not non-existent altogether. Only in the case of a depeg can liquidations take place.
What adds to all this flavor is that the depeg risk is contained to a great extent. The tokens deposited into Iron Bank’s lending market and from the liquidity pool are interest-bearing receipt tokens representing Dai, USDT, and USDC.