Benefit from lower borrow rates, amplify staking returns, and generate earnings as you spend!
The DeFi landscape has witnessed remarkable expansion, especially in the Liquid Staked Derivative (LSD) market. The Shanghai upgrade has facilitated staked ETH withdrawals, resulting in heightened liquidity for LSD providers.
baoETH caters to the borrowing demand of LSD holders who aim to exploit the disparity between the staking APR (4-7%) and the ETH borrow rate to boost their yield. A limited supply of ETH for depositing creates a dynamic where a minor gap persists between the ETH staking APR and the borrow APR. baoETH provides borrowers with borrowing liquidity at a reduced rate and with a lower correlation to the ETH staking APR.
baoETH is an overcollateralized ETH-pegged synthetic token generated by depositing ETH, bETH, or bSTBL as collateral into Bao Vaults. Revenues from borrowing are subsequently distributed to veBAO holders.
baoETH allows users to access the value of their bETH tokens with minimal liquidation risk while maintaining staking rewards. This feature is especially advantageous for users seeking to leverage their staking rewards or realize crypto gains without forfeiting their yield.
Amplify staking rewards: Deposit bETH into the vault, borrow baoETH, and exchange it for more bETH. Repeat the process to enhance your multiplier. With a maximum collateral factor of 90%, bETH holders can amplify their staking rewards up to 10x!
Generate yield on spent ETH: Deposit bETH and earn around 4% APR. Borrow baoETH at 1% APR and spend it. You are now generating a 3% yield on the spent ETH. Apply this approach to all the value you spend, accumulating a yield on a lifetime's worth of spending (exercise caution with new DeFi products like baoETH).
Earn yield while shorting ETH: Deposit bSTBL, earn around 2% APR, and borrow baoETH to sell. Utilize the proceeds to acquire more bSTBL to boost leverage.
Generate yield while earning yield: Deposit bSTBL or bETH, borrow baoETH, and place it in the baoETH/ETH liquidity gauge to gain additional Bao tokens.
A successful stablecoin launch requires not just borrowing, but also a demand for holding the coin. This demand arises from incentives offered by liquidity gauges and various pairings and integrations. Bao's baoETH/ETH and baoUSD/LUSD base pools generate demand and tackle liquidity challenges experienced by numerous DAOs.
Advantages of baoETH
Collateralization: Employing bETH as collateral allows users to tap into liquidity without selling their bETH tokens, which are already diversified and risk-mitigating.
Minimal Liquidation Risk: baoETH's over-collateralization enhances ecosystem security and stability by ensuring an adequate amount of collateral backs the token, minimizing liquidation event risks when utilizing collateral native to the Synthetic such as bETH or ETH.