In this post, we will explore how Raft solves the limitations of traditional lending platforms when it comes to leveraging stETH with One-Step Leverage.

TL;DR

One-Step Leverage allows you to get stETH leverage easier than ever before.

How does it work?

You deposit your initial stETH, select a leverage multiplier (within limits), and set max slippage tolerance. We flash mint R and swap R for stETH.

The stETH is deposited as additional collateral into the position.

Additional R is borrowed to repay the Flash Mint. This is abstracted away, so you’ve achieved significant leverage in one, simple step.

Drawbacks of Folding

With 5.8 million stETH currently in circulation, approximately 1.1 million stETH has been deposited into Aave (v2 and v3), and 630,000 stETH into Maker (Vault A and Vault B). This demonstrates the popularity of using Aave and Maker to leverage up on stETH.

However, these platforms have their drawbacks, including the need to manually repeat the borrowing and re-depositing process multiple times, known as "folding," to achieve significant leverage.

The manual loops are not only time-consuming but significantly gas intensive, as gas has to be paid over and over again for each iteration. This folding process also introduces complicated math that opaques the user's liquidation point.

As Raft's stablecoin R is solely backed by stETH, it is the most promising option for users to leverage their staked Ethereum. And it is also the easiest.

Raft's One-Step Leverage

Raft has created a solution called "One-Step Leverage" that makes leveraging stETH a seamless, gas-efficient, and straightforward process, eliminating the need for folding and providing a much better user experience.

Raft uses its Flash Mint mechanism to achieve this. Flash Mint is a powerful mechanism that allows users to borrow R like a Flash Loan, but without the need for a liquidity pool.

How does One-Step Leverage work?

One-Step Leverage makes the user experience much better.

After depositing stETH as collateral, the user just needs to select the amount of leverage and slippage and click "Execute". It all happens in one click.

If you're curious about how our smart contracts work to make One-Step Leverage possible, here's what happens:

1. User enters the following input:

a. stETH collateral amount (initialCollateral),

b. desired leverage multiplier (e.g. 3x), and

c. slippage tolerance for the contract to execute the swap between R and stETH.

2. Then, the smart contracts execute the following actions in one go, as a single transaction:

a. The contract flash mints a certain amount of R tokens (defined as flashMintDebt) which is the sum of flashMintAmount and flashMintFee.

b. The contract swaps the flashMintAmount amount of R for stETH in a liquidity pool. This operation requires the user to pay a swap fee, defined as swapFee. The expected R worth of stETH obtained through the swap, defined as addCollateral, is equal to:

c. The contract deposits addCollateral in the user Position to increase the collateral base. The final stETH collateral amount after the swap would then be equal to:

d. The contract borrows an amount of R equal to flashMintDebt.

The benefits of One-Step Leverage are clear. The folding process is abstracted away and can be executed by the user in a single transaction.

By eliminating the need for multiple borrowing and redepositing steps, the process is faster, cheaper, and more efficient. Users are not required to pay fees for each step, and there is no need to wait for transactions to settle before initiating the next step.

We have created a One-Step Leverage calculator for your convenience here. Please “Make a Copy” of the Google Sheet, then interact by adjusting the yellow input cells to see the output impacts.

Conclusion

Raft's One-Step Leverage solution provides a significant improvement to the stETH leveraging process. By leveraging the power of Flash Mint, users can obtain leverage on their stETH in a more streamlined and efficient manner.

This approach demonstrates Raft's commitment to creating a more user-friendly and accessible DeFi ecosystem. Say goodbye to folding and welcome One-Step Leverage for stETH.

Find here more info on Flash Mint and One-Step Leverage.

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Useful Links

• Website: https://www.raft.fi/

• Twitter: https://twitter.com/raft_fi

• Telegram Channel: https://t.me/raft_fi

• Telegram Group: https://t.me/raft_chat