Strategy 1 : Lend & Stake
Earning Yields at Low-Risk
In all types of investment, risk management is as important as earning high yields. One of the main methods of minimizing risks in DeFi services is participating as Lender and depositing single asset. Through KLEVA Protocol, there exists clear reasons for Farmers to borrow assets of Lenders and thus pay more Borrowing Interests, directly linking to Lenders' profits.
Lend & Stake
Lenders deposit their assets(Tokens) into the Lending Pool of KLEVA Protocol for Farmers to borrow, and receive Lending Interest (Farmer's Borrowing Interest) from Farmers. Farmers' borrowing the assets does not necessarily mean that Lenders' assets are locked - Lenders can freely withdraw their assets whenever they wish.
Some Lenders may be worried that after Farmers have borrowed Lenders' assets, their assets may be at risk of loss during the process of Yield Farming. KLEVA Protocol has thus implemented a mechanism to help protect Lenders' assets from such risks : Liquidation. When Farmer's Farming Position seems to be at risk, before such risk reaches Lenders' assets, KLEVA Protocol liquidates the Farming Position to protect Lenders' assets. When Liquidation occurs, Lenders' assets (that Farmers borrowed) are returned to the Lending Pool.
Therefore, depositing assets(Tokens) into Lending Pool provides the same effect as holding the same assets(Tokens). The difference is that by Lending, Lenders can expect additional rewards at low-risk. The profits Lenders can expect is illustrated below, using example with Dason.
Lending Profit (with Dason)
Dason deposits his 100 KLAY into KLAY Lending Pool, and receives 100 ibKLAY (ibToken) in return. At this points, Dason is eligible to receive Lending Interest from Farmers who borrow KLAY because he is holding ibKLAY. In other words, ibKLAY acts as the proof that Dason can receive Lending Interest.
Dason stakes his 100 ibKLAY into KLEVA Protocol. By staking his ibKLAY, Dason can receive KLEVA Rewards on top of his Lending Interest profit.
Dason deposits his KLEVA Reward into KLEVA Lending Pool, and receives ibKLEVA. Similarly to holding ibKLAY, Dason is eligible to receive Lending Interest from Farmers who borrow KLEVA.
Dason stakes his ibKLEVA into KLEVA Protocol. By staking his ibKLEVA, Dason can receive more KLEVA Rewards generated from farming performance fees. As such, Dason can expect more profit by staking ibKLEVA.
Dason can again deposit & stake his KLEVA Rewards from ibKLAY and ibKLEVA, further expanding his profit.
Summary
The profits Dason can then expect as Lender are :
Lending Interest (paid by Farmers as Borrowing Interest)
KLEVA Reward (from Staking ibTokens)
Additional KLEVA Reward (from farming performance fee)
All these profits can be continuously increased. Additionally, all these profits can be expected all the while Dason's asset is at low-risk. Lenders who may be afraid their asset may depreciate in value can also deposit Stablecoins in KLEVA Protocol, and still expect the same profits.
Please Note
Lenders may have difficult withdrawing their assets from the Lending Pool when the Utilization Ratio of Lending Pool is extremely high, meaning most of the assets in the Lending Pool are being borrowed by Farmers. Although such case is highly unlikely, KLEVA Protocol has implemented methods to stabilize / decrease the Utilization Ratio, including triple-slope model, allowing Lenders to withdraw their assets.
When price volatility of the asset (Token) is extremely high, Lenders' assets may not be 100% guaranteed. Although such case is highly unlikely, KLEVA Protocol has implemented methods to prevent such risks. Liquidation Threshold has been set to include such possibilities of risk, and is different for each Token Pair, due to the differences in price volatility. Tokens with higher volatility have lower Liquidation Threshold to counteract any risks arising from price volatility.
In the event of bad debt occurrences, the exchange rate may decrease. For detailed information, please refer to the Deposit & Staking page.
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