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Sturdy: A Special Lending Protocol on the Fantom Blockchain

By 2sats | 2sats | 24 Apr 2022


*obligatory not financial advice*

 

What is Sturdy?

Sturdy is a lending protocol on the Fantom Blockchain that uses the borrower’s collateral to create a yield for the lenders.

If you want to take a loan on Study, then you have to provide a collateral with more value first. FTM, BOO, LINK, SPELL and CRV are accepted as collateral and you can use them to borrow the USDT, USDC and DAI stablecoins that lenders are supplying. Maybe in the future there will be more tokens accepted as collateral and maybe tokens that aren’t stablecoins could also be used for lending and borrowing.

Normally, the interest that lenders are earning with a lending protocol comes directly from the borrowers. This can be a problem because should the APY for taking loans get too high people will stop taking them which makes it fall again and this also makes the APY for lending fall. That’s why Sturdy instead reinvests the provided collateral in other protocols like Yearn.Finance or it puts governance tokens into their revenue sharing pools like xBOO or xSPELL. The earned yield is then converted into the stablecoins that were borrowed and are given to the lenders.

This allows the users to earn a very high yield that can be far above 20% per year on stablecoins while the borrowers have to pay a much smaller APY on their loan back. This makes it in theory possible to have an infinitively high yield for lending without discouraging borrowing. The APY for borrowing is relatively low in comparison to lending and the goal is to eventually have an APY of zero for borrowing.

The process is very similar to the Anchor Protocol on the Terra LUNA blockchain that is using staking coins like ETH and LUNA as collateral to achieve an APY of about 20% for lending the UST stablecoin. But Sturdy gives its lenders a more variable APY, accepts more tokens as collateral and could in the future allow its users to lend and borrow different tokens besides stablecoins too. However, Sturdy is currently not a DAO and is rather centralized, which is a risk.

All of the smart contracts on Sturdy have been audited, but since the collateral is being reinvested into other protocols it strongly depends on their code too and would be hurt if there is a flaw in their smart contracts. But Sturdy is carefully about which protocols they pick and is only using very reliable applications.

Sturdy has so far only launched on the spooky Fantom blockchain, but will also launch on Ethereum within 2022. The platform is not perfect because it doesn't have its own governance token and it depends on multiple external protocols but it is still letting its users earn very high yields on their stablecoins and achieves that in a unique way.

 

 

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