Steadefi Vaults V2: Better Liquidity Efficiency

Steadefi V2 Vaults migration
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Jeff Lam
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Steadefi’s goal has is to help users with various risk/return appetites to earn yield profitably, across bull, bear and crab market conditions.
We are continuously learning and listening to feedback from our users towards our product offering to make things easier and more efficient, while looking towards creating new strategies that we believe the market wants.
We believe it is now time for us to take one of these learnings and translate them into deliverables as we continue to improve Steadefi’s product offerings to deliver and capture more value.

Overview of Steadefi’s Current Isolated Lending Vaults with Yield Sharing

One of Steadefi’s unique value proposition was to offer isolated lending vaults that only lend out assets to specific strategy vaults.
This proposition had many benefits in theory. However, after much observation in practice, we fully acknowledge the challenges that it brings to both lenders as well as Steadefi as well.
To recap, isolated lending vaults to strategy vaults brings about benefits to both lenders and Steadefi leverage vault (”SLV”) depositors as such:
  • When SLV earn higher yields, lenders earn higher yields too with yield being shared from leverage vaults to it’s isolated lending vaults
  • On the flip-side, when SLV earn lower yields, lenders charge a lower lending interest such that leverage vaults DO NOT have negative yields, which helps retain SLV depositors longer, allowing for continued utilisation of the assets of lending vaults (read: low yield better than no yield)
  • SLV continue to have automated monitoring and rebalancing of it’s borrows so SLV depositors do not have any risk of full liquidations
  • Lending vaults have isolated risks; if any SLVs has any issues or face any bad debt, only it’s specific lending vault(s) are affected
  • Lenders have the ability to specifically choose which lending vault to deposit their asset to based on the SLV’s yield source, the potential lending rates that can be earned, and so on
Left: Steadefi’s current isolated lending vaults. Right: Strategy Vaults
Left: Steadefi’s current isolated lending vaults. Right: Strategy Vaults

The Challenge with Isolated Lending Vaults

We continue to believe that isolated lending vaults DO provide more value to both lenders and strategy vault depositors.
The biggest challenge we have observed comes in 2 flavours:

Confusing Product Experience

Most DeFi users are still familiar with protocols that only offer 1 lending vault per asset type.
With multiple lending vaults per asset (e.g. USDC), it is overwhelming and confusing to many.
More thinking and decisions to make results brings about more friction.

Liquidity Inefficiency

The biggest downside of isolated lending vaults would be lack of liquidity efficiency.
Additionally, lenders are mostly passive in their deposits, with a longer timeframe for their yield earning activities.
For example, the market for strategy vault depositors may be towards borrowing more USDC to leverage towards ETH-USDC instead of ARB-USDC.
However, even when USDC lending liquidity for ETH-USDC strategy vaults are fully utilised (and have much higher yield), lenders are not users that would rebalance their lending liquidity from one USDC lending vault to another.
This means that depositors are not able to borrow more USDC to leverage long towards ETH-USDC despite there being USDC lending liquidity available in other vaults.
Additionally, when lenders want to withdraw their USDC from a specific vault, they may not be able to do so due to high utilisation, even though there is available liquidity in other USDC lending vaults.
Liquidity inefficiency essentially hurts both lenders and strategy vault depositors in the long run.

Liquidity Bootstrapping Problem for New Strategies

Additionally, every time Steadefi looks to launch new strategy vaults, we have to launch isolated lending vaults to cater to them.
This exponentially creates even more isolated lending vaults (even more product confusion) as well as giving us a challenge to have to bootstrap the new isolated lending vaults with liquidity all over again, resulting in more inefficiencies for both lenders and strategy vault depositors.

V2 Vaults: Better Liquidity Efficiency While Retaining Yield Sharing

We have decided to relaunch with new lending vaults that will now combine liquidity for similar assets.
Yes, this means that there are no more “Isolated Lending Vaults” in the strictest sense.
We believe that the market has told us that the benefits of isolated lending vaults do not outweigh the benefits.
However, the benefits of yield sharing from strategy vaults to isolated lending vaults still remain.

Yield Sharing Interest Rates Per Borrower Remain

Our new lending vaults, although no longer isolated, will continue to implement custom interest rate models per strategy vault, which effectively retains the yield sharing relationship between strategy vaults and lending vaults.
We believe this basically retain the benefits of isolated lending vaults while also removing the challenges of liquidity efficiency for both lenders and strategy vault depositors.

Simpler Product Experience AND Better Liquidity Efficiency

Furthermore, this translates into a much cleaner and simpler product experience, at least for lenders, as there will only be 1 lending vault per asset.
Lenders can truly deposit and not worry about rebalancing their lending liquidity. Lenders who want to withdraw would have higher probabilities of the ability to do so with combined lending liquidity.

Reduced “Liquidity Bootstrapping” Challenge for New Strategy Vaults

New strategy vaults being launched will now have less of a concern with regards to having to bootstrap new isolated lending vaults, making it a lot quicker for leverage strategy vaults to be more useful to depositors.

Next Steps

Simply withdraw liquidity from any of the V1 lending or strategy vaults that you have deposited in over at
If you have forgotten which vaults you have deposited in, simply click on your connected address at the top right to see the list of vaults you have deposits in:
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As lending vaults liquidity is also dependent on strategy vaults borrowing, we will look to progressively shut down all v1 strategy vaults til 30th April 2024.
Don’t worry: Strategy vault depositors will ALWAYS be able to withdraw their assets anytime even after the strategy vaults are shut down!
Additionally, all esSDY and ARB STIP grants will be progressively shifting from version 1 to version 2 vaults from 23rd April 2024 to 30th April 2024 to further incentivise liquidity to be migrated.

Final Note

Once again, we thank all supporters of Steadefi. We have a lot more strategy vaults incoming, but before we launch those, we believe we have to implement these new lending vaults first to make things more efficient.
In the meantime, do join and participate with our community over at
and follow us on for the latest and greatest announcements (plus future things we are doing!)
Jeff from Steadefi
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