Using leverage is extremely risky, and the additional yield-bearing derivatives each carry additional risk. Make sure you are qualified and have studied all associated risks before using.
There are many reasons why one might want to employ leverage in DeFi through a permissionless system like Blueberry. Let's walk through some of the use cases in detail for different types of users.
1: Yield Arbitrage
A common occurrence in DeFi is coming across one lending market with a different interest rate than you could deploy the borrowed asset elsewhere. This leads to a delta neutral opportunity for yield arbitrage. Blueberry allows users to borrow with leverage on Blueberry, then use borrowed funds in another protocol paying a higher yield.
Easy example: Deposit stETH collateral, borrow 6x ETH, swap to 6x stETH
Your price exposure would still be 1x ETH, while you would earn 6x the spread between the ETH borrow rate and stETH yield.
There are many reasons to use leverage when trading, whether you are attempting to mitigate your custodial risk of keeping funds on an exchange, or just trying to multiply your exposure.
Blueberry brings a unique leverage trading strategy on chain, allowing the user to earn yield on their collateral and sometimes also on the leveraged position.
Easy example: Deposit ETH Collateral, borrow 6x USDC, swap to 6x stETH
By swapping to stETH instead of regular ETH, you earn yield to offset the borrowing costs of USDC. If USDC borrowing costs are less than stETH yield, this would mean being paid yield to hold a leveraged long position on ETH.
3: Leveraged Farming
Leveraged farming allows you to borrow more assets than you have to earn a yield. Leverage farming is categorized differently than yield arbitrage because these strategies hold leverage exposure to the assets in the strategy, sometimes with unique mechanics like Liquidity pools, which do not carry 1:1 exposure to the assets within.
If you are new to the concept of leveraged yield farming, you should first read an intro article on the topic and avoid deploying capital into things you do not understand.
Easy Example: Deposit ETH Collateral, borrow 3x ETH, deploy into CVX+ETH Convex LP
By doing this with leverage, you earn 3x the rewards. However, if the CVX+ETH LP underperforms ETH significantly, this could lead to liquidation.
4: Uniswap v3 - Blueberry Vaults
Providing liquidity on Uniswap v3 has become a huge hassle for users due to complexity, necessity of active management, and high rebalancing costs.
Blueberry Vaults leverage the additional capital efficiency features of concentrated liquidity by creating openly accessible pools that use automated algorithms to outpeform passive liquidity and lower pro rate rebalancing costs. Additionally, Blueberry Vaults work to provide single-asset oriented returns. This mitigates IL risk and simplifies the system when combined with leverage.
Easy Example: Deposit ETH collateral, borrow 3x ETH, Deposit to ETH Sided ETH-USDC Blueberry vault.
If the vault works as intended, this turns providing liquidity on Uni v3 into a much simpler basis trade--borrow asset with x% interest, deploy asset earning y% APR, earn (y-x)*leverage.
The Blueberry vaults have been thoroughly tested in production environments, however, they are still experimental and carry considerable risks like the rest of the protocol. Do your research and do not invest funds you cannot afford to lose, as always.
Start a conversation about a new integration at discord.gg/blueberry