The Ethereum Liquid Staking Market has experienced remarkable growth in recent years, notably with the emergence of key players like LIDO and Rocket Pool. These platforms have streamlined the process, making it easier to generate attractive yields by delegating your ETH to pools of validators managed by these staking providers. The annual return on investment fluctuates depending on factors such as the overall amount of staked ETH and network performance.
This process enables users to deploy idle capital effectively, receive rewards, and actively contribute to enhancing the security of the Ethereum network.
The liquid staking market is currently boasting a Total Value Locked (TVL) exceeding $19 billion across all chains.
Ethereum takes the lead with over $17 billion with just 20% of total ETH staked, while other chains and L2s start to gain momentum.
Problem 🤔
In the booming Liquid Staking market, despite attracting significant capital and users, many participants lack the expertise to maximize their asset APYs. Utilizing Flash Loans, navigating Lending Markets, or engaging with DeFi Protocols demands a level of financial literacy and smart contract experience that typically takes months for the average crypto user to master.
Resolving this challenge demands additional effort from the product to educate users about the advantages and disadvantages of employing these DeFi Money Legos in their investment thesis.
The BakerFi Way 🍚
BakerFi is a fully non-custodial application for managing leveraged staking strategies in various DeFi lending protocols to amplify generated by users’ assets (ETH, DAI, GHO, among others).
Traditional staking providers typically offer APYs around 3-4% on ETH. In contrast, BakerFi’s strategy enables users to potentially more than double this yield to approximately 8% under current market conditions. 😱
BakerFi stands out as a unique product with a distinctive approach to the market. It employs singular strategies designed to empower any regular user to execute sophisticated and well-orchestrated DeFi strategies, optimizing returns on their capital. The product achieves this through two key pillars.
Firstly, it simplifies the intricate configurations essential for deploying DeFi strategies, abstracting them from the end user and ensuring ease of use, even for those with limited experience in DeFi.
Orchestrating a lucrative DeFi strategy requires some deep research and some level of expertise to make it sucess.
Secondly, it deploys strategies using global configurations, controlled by protocol, thereby reducing risks for the users and minimizing their exposure to market turmoils and black-swan scenarios. 🦢
A typical user may struggle to grasp the risks associated with applying an extremely high leverage to their position.
Apart from the configurations used in the strategies, our DAO core team will conduct a deep analysis of the historical performance of the strategies and only introduce strategies with limited and low risk.
The Baker’s DAO takes the user's capital seriously. 🏦
The protocol code and smart contracts will be reviewed by top auditors and hackers to ensure that the code is safe for public or broader usage.
Main Features ✨
✅ Simple User Interface 📺
BakerFi provides a user-friendly experience that eliminates the burden of deploying complex strategies to maximize your staked ETH with a unique interface.
✅ Amplified Yield 📈
Users select an ETH amount, click 'Start Program', and our smart contract automates optimal return actions in a low-risk strategy managed by the BakerFi Protocol.
✅ Liquid and Transferable Assets 💦
Users staking receive xbrETH, a liquid token, tradable and usable for any purpose, with daily reward payouts that could be redeemable for the underlying reward and deposited at any moment by the asset holder with no extra fee charged.
✅ Liquidation Protection ⛑️
If the health of any strategy falls below a specified loan-to-value threshold, the liquidity protection mechanism enables the strategy to deleverage its market position. This action is taken to diminish the likelihood of liquidation from the employed money market (AAVE, Compound, etc.). And, no additional fees are charged to our users for this mechanism extra mechanism.
BKR - Baker Governance Token 👑
BKR is a governance token, structured to foster user engagement, enhance protocol security, and streamline operational efficacy.
Within the token features, it will also include protocol rewards and dynamic APY-boosting algorithms.
This article is not about Tokenomics, more information about this topic will be released soon.
The first strategy wstETH-ETH Strategy is Live 💥
As a first step, Arbitrum One was chosen as the launch platform for the initial strategy. This decision allows the DAO to validate assumptions, gather feedback, and continuously improve the product based on insights from the community and early users.
This inaugural strategy involves depositing ETH, followed by recursively depositing wstETH on AAVE v3, effectively increasing the yield generated by our strategy. The deployed strategy maintains a target Loan-to-Value (LTV) ratio of 80% and initiates deleveraging if a depeg scenario occurs, with the LTV threshold set at 85%.
This strategy allows to amplify by 5x the exposure of the capital and generates a yield that magnifies the lido yield by 2x or 3x depending on AAVE v3 lending markets.
The yield obtained from this strategy is derived from staking rewards distributed by the Ethereum network to validators who actively contribute to securing the network. Additionally, it includes rewards accumulated from transaction fees paid by Ethereum users for the execution of their transactions. By exposing the capital to wstETH Lido Asset, it continuously collects rewards on the BakerFi Strategy Pool and amplifies them using a recursive strategy supported by the AAVE lending Market.
Based on the current last 30 days’ data:
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Lido: 3.6%
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BakerFi: 7.34 %
🚨 Disclaimer:* Currently the smart contracts are under audit and development so it doesn’t allow users to deposit more than 0.1 ETH.*
Soon a more detailed reasearch report explaining this strategy will be released.
The current strategy is undergoing testing to gather valuable feedback from users, as it remains in the experimental phase. Once the code is fully audited and verified, the maximum amount of ETH deposited restriction will be removed.
The protocol retains a 10% performance fee on the users’s APY, but deposits and withdrawals are free and there are no extra hidden costs, so feel free to play with it and send your feedback. It would be very appreciated 🤛
Next Steps 📈
The roadmap is strategically developed to incorporate a series of incremental feature releases and protocol upgrades.
The DAO core team will continue to explore more strategies to get included in the front-end user interface bakerfi.xyz, expand the services to other EVM chains, and improve the composability of our protocol.
Although there isn’t a specific timeline at the moment, you can expect new strategies on Arbitrum, Optimism, Base among other L2s soon.
The core team is currently refining strategies involving rETH (Rocket Pool ETH), cbETH (Coinbase ETH), DAI, and other money markets such as Compound or Morpho. Additionally, it is exploring the use of specific DEXes on different chains.
The team is also committed to continuously developing and deploying new strategies, driven by the needs and values of the community.
And here's a sneak peek into the future plans—there are some amazing projects in the pipeline. Stay tuned for more updates 📻.
The journey with BakerFi is just getting started!
BakerFi - “Staking strategies made easy” 🧑🍳