Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
This week, we cover a fixed lending yield powered by the demand to speculate on earning points with EigenLayer’s top competitor, Karak.
Karak is a new universal restaking layer, aiming to provide cryptoeconomic security using any asset.
Similar to EigenLayer, Karak enables protocols to tap into robust and secure trust networks, lowering the barrier to secure new protocols vs incentivizing their own validator sets, and thus making the process of bootstrapping security more scalable, accessible, and affordable.
Karak is still in an early bootstrapping period, recently peaking at $1B in value restaked. Two of the most popular methods for participating in Karak restaking are:
Liquid Staking/Restaking: Users can deposit their Liquid Staking Tokens (LSTs) or Liquid Restaking Tokens (LRTs) into Karak smart contracts, which includes protocols such as Lido, Rocket Pool, Mantle, and ether.fi.
Stablecoins: Users can also restake by depositing stablecoins into Karak smart contracts, such as USDe, sUSDe, sFRAX, USDC, USDT, or sDAI.
Given there is no Karak native token launched yet, there’s rampant speculation about the future value of this token while restakers earn Karak XP. The Karak XP Program is a program where users can earn XP in exchange for restaking assets and referring others to restake assets on Karak.
Adjacent to Karak’s XP Program are partner protocols like Pendle Finance that have launched pools to support Karak restaked assets in exchange for yield and points.
Similar to the LRT pools launched for EigenLayer on Pendle, the new Karak pools offer higher PT (principal token) yields due to increased demand for the YTs (yield tokens), which earn all of the yield + Karak XP.
As speculators buy up YTs driving the YT price up, the price of PTs goes down, meaning you can buy PTs for a discounted price that will mature to full value by expiry date (like a zero coupon bond).
Currently, PT-eETH (Karak) is discounted enough to earn new PT buyers an estimated 21.9% APY through September 25, 2024.
Today, I’ll show how I’m taking advantage of the demand for Karak YTs and buying Karak Pendle PTs to earn a fixed yield with my ETH.
How to Earn ~22% APY Fixed with Pendle PT-eETH (Karak)
Before we get started, please be aware of these risks.
- Smart contract risk in Pendle, etherfi and Karak
- Front-end spoof attack on the app frontend
- Oracle risks
- An economic design exploit
- Systemic risk in DeFi
- A depeg in eETH could lead to a total loss of any deposited funds
- Colluding signers on any multisig
- Whenever Karak is fully live, eETH restaked on Karak could be slashed.
Here’s how I get started!
- First, I connect my wallet here to the Pendle app on Ethereum Mainnet and look for the PT eETH (Karak) PT market. I click on the PT (in green).
- Here, I can swap any token in my wallet (preferably ETH) to buy the PT-eETH (Karak) expiring on Sept 25, 2024, meaning I’ll lock in a fixed 21.9% APY through that maturity date.
That’s it! I can now return in September or anytime before then to redeem my PTs for the underlying eETH, earning an estimated 21.9% APY.
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DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
