Sturdy
Sturdy is a first of its kind DeFi protocol for interest-free borrowing and high yield lending. Rather than charging borrowers interest, Sturdy stakes their collateral and passes the yield to lenders. This model changes the relationship between borrowers and lenders to make Sturdy the first positive-sum lending protocol.
How Sturdy works
On existing lending protocols, the interest earned by lenders comes from borrowers. So in order for lenders to earn more, borrowers must pay more. Sturdy uses a different model, where yield instead comes from the borrowers' collateral.
When borrowers provide a token as collateral, Sturdy converts it into an interest-bearing token (ibToken) using protocols like Yearn or Lido. Over time, these ibTokens accrue yield; the yield from these tokens are then distributed to lenders in the same token they deposited. Here's an example:
- Alice deposits 100 USDC to the protocol
- Bob provides .05 ETH as collateral and takes out the 100 USDC Alice has deposited as a loan
- Over time, Bob’s debt remains constant and Alice’s balance grows
Here’s what happens under with Sturdy:
- When Bob provides his ETH as collateral, Sturdy stakes it via Lido, converting it to .05 stETH (a yield-bearing version of ETH)
- Thanks to Lido’s mechanics, stETH rebases to a new balance of .06 over time
- Sturdy swaps the yield of .01 stETH to 40 USDC and increases Alice’s balance to 140 USDC
Collateral staking strategie
- ETH is converted to stETH by either staking directly in Lido or swapping in Curve, depending on the exchange rate. When a user deposits stETH it is not staked anywhere, however they will not receive staking rewards. When a user withdraws their collateral as ETH, it is swapped via the Curve pool and subject to the current market rate.
- frax3crv, ib3crv, and susd3crv are staked via Convex. Borrowers earn the Base Curve APR and a portion of the CRV vAPR from Convex staking.
Borrower interest rates
- Loans on Sturdy are interest-free, except for the atypical case where a reserve has utilization greater than 90%.
- Utilization is the percentage of deposited funds that have been borrowed. For example, if $1m USDC has been deposited into the protocol and $900k has been borrowed, then the utilization rate is 90%.
- Interest rates increase 4% for every percent that utilization goes above 90%, meaning at 100% utilization borrowers pay 40% APR.
- These parameters are subject to change based on liquidity and market conditions.
Lender yield
Yields are paid out every 24 hours. Because yields come from collateral staking, they are not paid out consistently day over day. The displayed APY will typically be different from the APY you receive after 24 hours, but historically has been accurate over a longer period (1-2 weeks).