Vaults on Notional: How to Earn Up to 17-20% Yield with Leveraged stETH/ETH

Vaults on Notional

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

Previously, we have covered the DeFi fixed lending protocol Notional Finance. Launched in 2020, Notional grew lending pools to nearly $1B in 2021 before experiencing a fairly severe drawdown in liquidity during the bear market, now just $50M.

This reflects a lack of product-market fit still to be found with DeFi fixed income. However, I think Notional has returned with a clever product to reignite interest in their protocol–leveraged ETH vaults. 

Given the market driven interest around ETH liquid staking derivatives (LSDs), Notional has launched Leveraged Vaults based off the Balancer wstETH/ETH LP staked in Aura Finance, allowing users to borrow ETH from Notional, deposit that ETH into the Balancer wstETH/ETH pool, stake the LP tokens on Aura, and then harvest the incentive rewards. The vault converts borrowed ETH from Notional into wstETH and both are provided as liquidity to the Balancer pool.

Currently, there are 5 rewards/fees driving the yield for Notional Leveraged Vaults:

  • Trading fees in Balancer
  • BAL rewards
  • LDO rewards
  • AURA rewards
  • Underlying ETH staking yield (wstETH)

Leveraged Vaults allow for up to 12X leverage and require a minimum debt of 100 ETH, meaning users might deposit as little as 8.33 ETH at 12X leverage.

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