Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
Instadapp is one of the oldest and most popular applications in DeFi. Instadapp started as a dashboard for managing leveraged positions on Ethereum in Compound and Maker. This premier dApp grew even more popular in the summer 2020 (DeFi Summer) for its signature flashloan recipes which allow the average DeFi user to wind up leveraged positions to maximize earning COMP rewards. Today, Instadapp has about $5.1B TVL in its smart contracts and has grown to support other chains such as Polygon, Avalanche, Fantom and Ethereum L2s such as Optimism and Arbitrum. Instadapp allows DeFi power users to do just about anything with leveraged positions in Compound, Maker, and Aave such as collateral swaps, debt swaps, loan migrations, and unwinding positions in a few clicks using flashloans.
Recently, Instadapp Lite launched to help DeFi users more easily maximize gains by reducing the number of transactions, saving on gas, and automating fee collection, while actively monitoring their DeFi strategy. Instadapp Lite is similar to Yearn, whereby you get exposure to complex yield strategies in 1-2 clicks, but by using Instadapp’s DeFi Smart Layer. Instadapp Lite is able to use staking rewards from Ethereum and trusted DeFi protocols to generate yields across popular assets like ETH, WBTC and stablecoins.
The most popular Instadapp Lite vault today uses a strategy where staked ETH from Lido (aka stETH) is deposited into Aave. stETH on its own is earning 3.8% APR in ETH validator rewards. By utilizing a leverage strategy where we borrow ETH against stETH collateral, swap ETH for more stETH, redeposit more stETH, and borrow more ETH, we can increase the staking interest earned with stETH by up to 3x.
In the following tutorial, I’ll walk through how I’m using this ETH vault by Instadapp Lite to earn ~8.63% net APR in ETH as of this writing.
How to Earn Up to 8.63% APR in ETH with Instadapp Lite
For anyone holding ETH or stETH, Instadapp Lite’s ETH vault enables you to earn passive yield by recursively borrowing ETH against stETH collateral on Aave. Aave now accepts stETH as collateral, where users can borrow up to $0.70 against every $1 of stETH, and soon it’ll be an even higher LTV once Aave v3 launches on Ethereum L1, activating what Aave calls eMode for borrowing with even higher capital efficiency. I would expect these stETH/ETH vaults will see even higher yields once this happens in the near future.
Before we get started, please be aware of a few major risks.
- Smart contract risk in Instadapp, Lido, and Aave
- Oracle failure could lead to an exploit (despite being very unlikely)
- Systemic risk in DeFi composability
- Pegged assets such as stETH can potentially de-peg
- Estimated rewards can go up or down depending on the amount of competing liquidity and variable rates borrowing ETH on Aave
Here’s how I get started with Instadapp Lite!
- First thing is I go to the Instadapp Lite app and connect my Ethereum wallet in the top left corner.
- Then, I click on the Start Earning under the ETH vault.
- I specify whether to deposit ETH or stETH and how much. For this example, I choose ETH and deposit 1 ETH, and lastly confirm the transaction on my MetaMask wallet after clicking Deposit.
Lastly, I…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
