[Serenity Premium] Sturdy Finance [Initial Review Mar 2023]

Sturdy Finance is a protocol for lending and borrowing on Ethereum & Fantom blockchains. It provides interest-free borrowing and leveraged farming, allowing borrowers to leverage up to 10 times the value of their collateral assets. Unlike AAVE and Compound, Sturdy employs a unique model where liquidity providers profit by receiving a share of the yield from borrowers’ collateral assets, rather than receiving interest payments.

The Strategy in this Article

This strategy is providing liquidity into Sturdy Finance USDC Pool in the Mainnet.

Current yield: 30.4% (15 March 2023)

Our risk assessment: Low to Medium

Our yield projection based on this week's Benchmark Yield: 10.4%

*As yields of the week of 13th Mar were greatly affected by USDC depegging, we are referencing to the Benchmark yield of the week of 6th Mar.

The Concept and How the Protocol Works

Overview

Sturdy Finance is a lending and borrowing protocol that originated on Fantom and was later deployed on Ethereum. It differentiates itself from traditional lending platforms such as AAVE and Compound by offering interest-free borrowing. Instead of relying on interest payments from borrowers, lenders earn a share of yield farming profits generated by borrowers. Borrowers collateralise their yield-bearing assets and pay lenders a portion of the yield, creating a positive-sum lending environment where both parties benefit. This approach allows borrowers to access interest-free loans while lenders can earn yield without increasing borrowing rates.

Accepted Collaterals

Sturdy has two markets, the stablecoin market and Ether market. The two markets are separate with different lending pools and collaterals. For the Stablecoin market, the accepted collaterals are as follows:

• Curve FRAX/3CRV LP token

• Curve sUSD LP token

• Curve FRAX/USDC LP token

• Curve TUSD/FRAXBP LP token

• ETH / Lido stETH

They are further deposited into Convex / Lido by Sturdy to earn yields. The deposit APY rates displayed in Sturdy's UI are based on 7-day average (v.s. Convex's 24-hour average, which are different).

Borrowers use the above assets as collaterals to borrow USDC, USDT and DAI supplied by lenders.

Additionally, Sturdy Finance allows borrowers to leverage their yield-bearing collateral assets up to 10x in exchange for sharing some of their yields with lenders or liquidity providers. See section "Alternative Investment Method" for more details.

The Interest Free Mechanism

Borrowers in Sturdy do not pay interest. Instead, they share their yield-bearing assets and pay lenders a portion of the yield. The split is as follows：