Lybra Finance: Earn 59% APR with eUSD Borrowed Against stETH

Lybra Finance

Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.

Last week, we covered an up-and-coming LST-fi protocol called Gravita, which allows users to borrow interest-free against staked ETH collateral, with a 0.5% upfront minting fee. This week, I’ll cover another rapidly growing LST-fi project that has attracted an enormous amount of capital ($182M TVL) called Lybra Finance.

Lybra is designed to establish a new interest-bearing stablecoin that is secure and fully decentralized to function “as a genuine crypto bank account for its holders, independent of any government or authority.” Lybra will attempt to do this using LST yields (ie stETH) to pay interest proportionally to eUSD holders, which results in its borrowers not only borrowing interest-free but also getting paid to open a loan. Here’s how the protocol design works below:

Lybra Finance
  • Users deposit ETH or stETH and the protocol mints eUSD, with a collateral factor of 170%, meaning 58% LTV on loans. Please not there’s an inconsistency in the copy on the website and in Lybra docs whether max collateral factor is 150% or 160% or 170% so I’m being extra cautious and quoting the highest CF to be safe.
  • Lybra protocol then stakes any deposited ETH into LST protocols such as Lido, which then earns staking yield for the protocol and its users.
  • Lybra Protocol automatically converts any ETH deposits to stETH. The protocol treats 1 ETH as 1 stETH.
  • Lybra exchanges the staking revenue generated by stETH into eUSD and airdrops it proportionally to eUSD holders, allowing

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