Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
This week, we cover a newly launched automated leverage protocol, aka folding protocol, for yield strategies outperforming market rates!
Historically, leveraged farmers increase their exposure to a yield-bearing token or airdrop strategy by depositing that same token to borrow on a money market where it is whitelisted as collateral. The borrowed funds can then be swapped to generate more of the same collateral.
By looping or folding this debt position repeatedly, a highly leveraged exposure can be achieved depending on the maximum LTV (Loan-to-Value) of the pool. In Wealth Mastery, we cover these strategies often!
However, manually entering a folded position can be tedious, risky, and gas-intensive. Users must monitor their health ratio to ensure that market volatility or high interest rates do not bring their debt position above the liquidation threshold.
Back in April, Origami Finance launched on Ethereum Mainnet to enable users to fold their exposure to yield bearing tokens with minimal position management. Now with Origami Leveraged Vaults (lov), users can simplify the folding process into one click and instantly create a leveraged yield-bearing position that automatically maintains a high LTV to maximize returns.
One example of a yield-bearing token that’s ideal for such a folding strategy is USDe by Ethena. For yield farmers earning Ethena Sats, users can maximize their potential farming power by applying 7x leverage relative to their actual USDe holdings. See an example below for how a lov-USDe vault works on Origami!
The liquidity required for lov-Strategy vaults is supplied externally through a lending platform such as Spark Finance or Morpho Finance, while the vault determines when to lever up or down against vault reserves to achieve the target exposure and avoid liquidation.
A user’s share of the lov-Token supply reflects their share of the lov-Strategy vault’s withdrawable reserves. The non-withdrawable portion of lov-Strategy reserves is used to collateralize the outstanding loan principal and any accrued interest.
What’s more interesting about Origami is that the lov-Strategy vaults such as lov-USDe, incorporate farmed points into the estimated total vault APY yield on the front-end. This estimate is updated daily and it allows Origami to showcase the higher forecasted yield based on points earned, such as Ethena Sats.
When Ethena fulfills its commitment to reward ENA tokens to the community, Origami users will be able to redeem their rewards on a pro-rata basis proportional to their share of the Origami vault over their deposit period. Meanwhile, Origami charges a 10% protocol fee on the harvested rewards and is paid in oTokens to Origami’s treasury.
As of this post, Origami has attracted over $9.44M TVL. Origami has not released its own token, as it is currently rewarding Origami Ori Points. Based on their Twitter posts, their token looks likely to release in the coming months which means early adopters of Origami will be retroactively rewarded with an Origami native token. Origami is also expected to be one of the first live DeFi protocols on Bera Chain.
Today, I’ll show how I can get maximum exposure to yield-bearing tokens such as sUSDe on Origami and earn maximum…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
