Hey folks, welcome to yet another article where I try to break down some of the best yields available on stablecoins, except this time all in relation to $LUSD, Liquity’s native decentralized and overcollateralized stablecoin

I’ve written about $LUSD, many times in the past so if you’re interested in learning about the mechanics and/or how it’s able to keep peg, I highly recommend you take a read before diving into things any further:

I’m a big fan of Liquity and $LUSD, and it’s clear that many others do too as it seems like it gets forked every week.

Let’s dive into some of these yields shall we?

$ERN-$LUSD Vault on Yearn.fi: 31.39% APY

This strategy comes from Yearn.fi which builds on top and compounds the Velodrome’s ERN-LUSD liquidity pool over on the Optimism Network, one of Ethereum’s most popular layer-2s. $ERN, if you’re unfamiliar, is also an overcollateralized stablecoin from the Oath Ecosystem that has similar mechanics to Liquity.

Instead of going through Yearn.fi, you can bypass it by going straight to Velodrome yourself, where you can access still a very decent APR of 22.32%, albeit all in Velodrome’s native $VELO token:

And like with any solidly fork token, $VELO can be staked in order to gain additional voting rewards but be wary that you are also at risk of being exposed to some pretty significant price volatility:

$VELO 1-month chart on coinmarketcap.com

$USDT-$LUSD Vault on Velodrome: 23.78% APR

Speaking of $VELO, Velodrome (once again on the Optismism network) has another liquidity pool involving $USDT:

Although not immune to getting FUD, $USDT is significantly more battle-tested and has proven itself as a flight to safety even when other fiat-backed or overcollateralized stablecoins went through major depegs.

If you are a veVELO NFT holder, it might behoove you to vote for the current bribes on this pool as well:

The biggest downside I would say to this pool is that due to the low TVL, the APRs coming of this pool might not be scalable if you’re coming in with significantly huge amount of funds.

$MAI-$LUSD Vault on Beefy.finance: 21.90% APR

Also built on top of Velodrome, Beefy.finance’s $MAI-$LUSD auto-compounding vault has slightly larger TVL (according to Velodrome, more than $50k). And similar to the Yearn.fi strategy, entering into Beefy’s vault removes your exposure to $VELO, Velodrome’s native token.

If you’re unfamiliar with $MAI, it’s the overcollateralized stablecoin of mai.finance, where you can mint $MAI by putting up different assets as collateral. In Optimism’s case (as is the network for this particular strategy), you can put the following assets up as collateral in order to mint $MAI:

$MAI like other collateralized stablecoins has been shown to be pretty resilient throughout depeg events as well.

$LUSD-$USDC.e on Camelot: 7.43–21.19% APR

The only Arbitrum-network strategy on this list comes from Camelot, one of the network’s premier DEXes. Despite the healthy TVL, you’ll notice in the graphic above that this is an incentivized pool with only approximately 0.55% earned from real fees. In other words, this might not be that lucrative of a pool in the long term unless incentives continue to be applied. Yet apart from possible incentives ending, the biggest downside to this strategy is probably being exposed to $GRAIL’s token price which hasn’t been doing too hot this past month:

Like other Camelot pools, by entering into this strategy you will be exposed to their native token $GRAIL which can be staked for $xGRAIL, thus giving you greater APR:

In other words, if you decide to lock up your $GRAIL for a significant period of time — you may get higher APRs, but you may also lose more than you earned by being exposed to $GRAIL itself.

Conclusion

Liquity’s collateralization model has been repeatedly battle-tested, making if perhaps one of the safest stablecoins in DeFi. And due to the protocol’s decentralized trove mechanics, as long as there is demand for $ETH there will always be an equal incentive and demand for $LUSD.

If you’ve identified a strategy that’s not on this list, I would appreciate you messaging me some of the details in the comments below. Otherwise, I hope you found this article helpful in giving you some ideas about how to maximize your returns on one of crypto’s premier decentralized stablecoin.

And as always, thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates. Also, looking for a gift for your Crypto-loving/hating friend? Give them a REKT journal to cheer them up!

Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Cheers everyone!