My recent post on "Demystifying Re-staking" has sparked a lot of interest. People want a deeper dive into this topic, preferably turning knowledge into profits.

So today, I'm going to show you how to maximize re-staking returns through a live trading example.

1. My Re-staking Live Trading

Below is a snapshot of my re-staking live trading account. You can check it anytime through this link.

At first glance, you might think it's a bit odd. These protocols don't seem like re-staking protocols, do they? How are they related to re-staking? Well, that's the magic of blockchain. Because of modularity and tokenization, even seemingly unrelated protocols can be tightly integrated.

I divided my funds into six parts, each with 0.12 ETH, participating in leveraged liquidity mining with re-staking tokens (weETH, wezETH, wrsETH) from Juice, Stella, and Extra protocols. For instance, weETH and wezETH are staked in Juice and Stella; wrsETH is staked in Juice and Extra.

Why leverage liquidity mining? And why Juice, Stella, Extra protocols with weETH, wezETH, wrsETH re-staking liquidity tokens? I'll explain in detail later.

Why divide funds into six parts for three protocols?

1. Diversification – don't put all eggs in one basket.

2. Comparison – find the best performing protocol to guide your decision-making. Note that the maximum leverage offered by these protocols varies, which is a crucial factor for your decision.

Which protocol will win? Time will tell. On the third Wednesday of August, I'll review this re-staking live trading and you'll know the answer. By the way, on the first Wednesday of every month, I review the Bitcoin accumulation live trading. I usually post articles on WeChat public account at 9 PM on Mondays and Wednesdays, with earlier updates on Mirror and Discord. Monday posts cover zero-cost airdrop hunting for beginners; Wednesday posts cater to advanced users, including theoretical articles, live trading tutorials, and review analyses.

Now, back to my re-staking live trading.

Your biggest question might be: how can you maximize re-staking returns through Juice, Stella, or Extra?

2. How to Maximize Re-staking Returns?

To maximize re-staking returns, you need leverage. However, leverage incurs interest costs. Wouldn't it be great to offset those interest costs? Liquidity mining is a good way to do that.

In short, maximizing re-staking returns requires two tools: leverage and liquidity mining.

Liquidity mining is the purpose of using leverage.

Leverage means borrowing money to invest. By borrowing, you can amplify your investment amount, potentially gaining higher returns. This process is called leveraged investing.

Liquidity mining involves providing liquidity on decentralized exchanges (DEX) to earn a portion of the trading fees. These fees are paid by users trading with your liquidity. If the DEX is new, there might also be airdrop rewards. Uniswap's airdrop remains a fond memory for many.

Leveraged liquidity mining is a widely used method, offered by many platforms. Here, instead of over-collateralized loans (deposit 100, borrow 50), you get margin loans (deposit 100, borrow 200). You can't withdraw the borrowed funds; they're strictly for liquidity mining.

2.1 Why Juice, Stella, Extra?

Juice, Stella, and Extra integrate leverage with liquidity mining.

Many similar platforms exist, as listed on Defillama, which currently tracks 29 major leveraged liquidity mining protocols.

After thorough inspection, the three platforms highlighted in red (Juice, Stella, Extra) meet our criteria. After paying interest costs, they offer the following returns:

• Liquidity mining yield: Trading fees.

• Re-staking income: AVS + PoS.

• Airdrop rewards: Re-staking airdrops, liquidity mining platform airdrops, etc.

These combined returns can offset the interest on WETH borrowing. That's why I no longer use Airpuff, where borrowed funds only serve for re-staking airdrops, effectively exchanging interest for airdrops.

Juice, Stella, and Extra reinvest borrowed funds into liquidity mining, making them a better choice.

2.2 Why weETH, wezETH, wrsETH?

The three liquidity staking tokens I have chosen are weETH, wezETH, and wrsETH. The "w" at the beginning stands for "Wrap." When these tokens are transferred to the Ethereum mainnet, they can be unwrapped into eETH, ezETH, and rsETH, respectively.

Using weETH as an example, click on the link to enter the official website, and you will find that 1 weETH = 1.04243 eETH. Note the position of the arrow in the image below, indicating that only weETH can be transferred to other L2 networks.

I chose weETH, wezETH, and wrsETH for re-staking liquidity tokens because they are large enough, ranking among the top 5 in the re-staking field.

Large scale reduces the risk of price decoupling from ETH. However, we must still acknowledge the risk of re-staking token decoupling. Such events have occurred historically, like the stETH incident.

2.3 The stETH Decoupling Incident

This incident in June 2022 shocked the entire DeFi community.

stETH, or staked ETH, is a token from the Lido protocol. It allows users to stake ETH in the Ethereum 2.0 network and receive stETH as a staking certificate. Lido provides a flexible staking method, enabling users to continue participating in other DeFi activities with stETH.

In early June 2022, market panic and mass user redemptions caused stETH's price to significantly drop below ETH. Worse, stETH liquidity providers began withdrawing from liquidity pools, fearing decoupling risks. This chain reaction led to a sharp drop in stETH's price across multiple platforms.

The most memorable day was June 12th. That morning, many users sold stETH on decentralized exchanges like Curve and Uniswap, attempting to exchange it for ETH. Due to massive selling pressure, stETH's price briefly fell to 0.94 ETH, meaning users holding stETH lost 6% of their value instantly. In the following days, stETH's price fluctuated dramatically, dropping to as low as 0.90 ETH.

This decoupling wave affected not only ordinary users but also large investors and institutions. For instance, one whale account, holding a large amount of stETH, had to sell at a low price due to the price crash, resulting in millions of dollars in losses.

This incident taught us a vivid lesson: even re-staking tokens can decouple. Analysis shows that user redemptions and reduced liquidity were the main causes.

As project developers, you can't control user redemptions but can provide strong liquidity for re-staking tokens, making liquidity mining a behavior to be encouraged and supported.

2.4 Why Liquidity Mining?

Compared to simply holding re-staking tokens, project developers prefer more users to engage in liquidity mining to reduce decoupling risks.

Users are willing to provide liquidity for re-staking tokens because there is no impermanent loss.

Simply put, the reason re-staking liquidity tokens can have traditional liquidity mining opportunities is due to their nature. They all belong to the ETH family, meaning eETH, ezETH, and rsETH rise and fall with ETH, similar to the USDC-USDT stablecoin pair. As long as the prices remain pegged, there will be no impermanent loss.

Impermanent loss is a risk in liquidity mining. When you put two different cryptocurrencies into a liquidity pool, price fluctuations can cause the actual value of your assets to decrease when you withdraw liquidity. In short, impermanent loss is a potential loss due to market price fluctuations.

For example, if you put ETH and USDT into a liquidity pool at a 1:1 ratio, and the ETH price rises or falls sharply, you may find that you have fewer ETH and more USDT when you withdraw, with the total value being lower than if you had held the two cryptocurrencies directly. This is a typical manifestation of impermanent loss.

However, for tokens like eETH, ezETH, and rsETH that move with ETH, as long as prices remain pegged, there is no impermanent loss, offering a more stable liquidity mining opportunity.

3. Operation Guide

3.1 Juice

This protocol is on the Blast L2 network. Click the link to enter the Juice re-staking collateral page.

Click "Connect" at the top right to link your wallet, and you'll see the following invitation code window.

You can click "Continue" to let Juice give me more points, which is like borrowing flowers to offer Buddha. You can also click elsewhere to skip this step without affecting subsequent operations.

3.1.1 Using Re-staking Tokens as Collateral

You'll find that two re-staking tokens can be directly used as collateral. You need to swap ETH for weETH and wezETH. Below, I'll explain the process of leveraged liquidity mining with weETH.

Click the link to swap ETH for weETH on Thruster, the largest exchange on Blast.

Once you have weETH, return to Juice and click the arrow position shown below.

Open a sub-account.

Deposit the recently swapped weETH.

Click the "Borrow" tab, select "Max", and click the "Borrow WETH" button to complete the leveraged borrowing.

On the same page, deposit the borrowed WETH to generate a liquidity token pair, HYPLP. Click the arrows in the image below to complete the process.

After completion, you'll see the deposit of WETH and LP shown in the box below.

Following the arrows in the image, you'll see your liquidity mining position.

Similarly, you can swap ETH for ezETH and follow similar steps to complete the leveraged liquidity mining process for ezETH.

Since wrsETH isn't provided as collateral, we'll have to use WETH collateral to complete leveraged liquidity mining.

3.1.2 Using WETH as Collateral

Similar to opening a sub-account, you need to open a sub-account for depositing WETH and borrowing WETH.

Wrap ETH to WETH.

Deposit and borrow the maximum amount of WETH, following the same steps as depositing weETH.

Click the arrow position above to enter the page below and use the borrowed WETH for liquidity mining.

Following the instructions above, find the wrsETH liquidity mining protocol, Kelp V3 LP V2, and click "Access" to enter the page below.

The steps for other liquidity mining operations are similar.

After completing the above steps, you can find your borrowing position in the "Position" menu.

In the middle of the "Position" page, you'll see the liquidity mining status.

Reminder: Use re-staking tokens as collateral when possible for additional re-staking rewards.

Also, leveraging to the maximum should be fine, around 3x. For safety, you can reduce it to 2.5x leverage.

3.2 Stella

Stella is on the Arbitrum L2 network and offers leveraged liquidity mining for eETH and rsETH. Note that these two will expire on August 8th, requiring new pools afterward.

Click Stella and follow the arrows to find the two re-staking leveraged mining protocols.

Below, I'll use eETH as an example.

Here, only ETH can be deposited. Choose the leverage multiplier (I chose 6x) and click the "Open Position" button.

Note that the debt ratio reached 96.98%. If it hits 100%, liquidation occurs. For safety, you might want to set it lower. The rsETH operation is similar, so I won't go over it. The result looks like this.

The above screenshot was taken 48 hours later. Keen observers will notice the debt ratio for eETH dropped from 96.98% to 96.59%, a decrease of 0.39%, indicating a safer position due to liquidity mining earnings.

3.3 Extrafi

Extrafi is on the Optimism L2 network, currently offering leveraged liquidity mining only for wrsETH.

Click the link, follow the arrows to find WETH-wrsETH, and click the "Farm" button.

You can provide two types of collateral. It's recommended to use wrsETH for additional re-staking airdrops. If unavailable, swap ETH for wrsETH here.

After obtaining wrsETH, follow the arrows below to click.

The maximum leverage here is 3x, which can be set to the maximum and confirmed.

Note that the available amount of wrsETH on Optimism L2 is limited to 1.22 WETH.

However, there's plenty on Base L2, with 56.2 WETH available.

Although Extrafi offers liquidity mining for ezETH and eETH, the interest rates are too high (circled above), so don't participate as it's like exchanging interest for airdrops.

This concludes the live trading tutorial for leveraged liquidity mining with re-staking across Juice, Stella, and Extrafi.

Conclusion

On August 21st, the third Wednesday of August, I will review this re-staking live trading. Considering safety and profitability, I'll provide my specific recommendations.

One point worth emphasizing is that blockchain's modularity and tokenization allow seamless protocol combinations and interactions, becoming a new norm.

You don't need to reinvent the wheel; just use these wheels effectively.

Thus, I believe the future of blockchain is vast and promising, transforming the traditional financial industry into a creative industry.

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