In decentralized finance (DeFi), Real Yield USD and Real Yield ETH strategies by Seven Seas are potent tools for maximizing returns. Real Yield USD offers a set-and-forget solution for stablecoins management, while Real Yield ETH optimizes yields on Ethereum liquid staking tokens (LSTs). This article explores those Sommelier strategies, along with their benefits and intricacies.
What Is Real Yield in Sommelier?
Unlike many other DeFi solutions today, Real Yield allocates stablecoins or ETH across three different protocols rather than one. This allows for greater flexibility and higher returns compared to those working with just one protocol.
Sommelier employs ERC-4626 vaults and off-chain computation to ensure dynamic optimization of capital in a non-custodial and decentralized environment. It calculates the best possible allocation of funds through numerical optimization accounting for swap fees, market impact, positions, and straightforward time-series forecasting techniques.
This came in handy during the recent USDC turmoil caused by the recent US banking crisis. The ensuing instability in the stablecoin-banking interface led to a significant deviation from the intended 1 USD for 1 USDC price. The Seven Seas team monitored all market conditions and maintained a diversified portfolio, allocating 25% to USDC, 25% to DAI, and 50% to USDT. When the news that SVB customers would be fully reimbursed became available, Real Yield USD converted both DAI and USDT to USDC to take advantage of the available arbitrage opportunity.
Eventually, Real Yield USD effectively took advantage of these elevated rates, achieving profitability of nearly 25% per annum during the period of unrest.
The Real Yield Strategy: How Does It Work?
The Real Yield Strategy relies on Liquid Staking Tokens (LSTs). These tokens are designed to represent the staked value of the underlying assets (in our case, Ethereum or USD-pegged stablecoins) that are locked in vaults while allowing token holders to maintain their liquidity. In other words, they enable users to access the benefits of staking rewards and participation in the PoS network while still being able to transfer, trade, or use their tokens as needed.
Thus, in Real Yield ETH, there are three vaults, which are special smart contracts designed to implement the underlying allocation strategy:
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stETH (Lido Finance’s LST)
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cbETH (Coinbase’s LST)
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rETH (Rocket Pool’s LST)
Real Yield increases its resulting returns through LSTs by optimizing Uniswap V3 tick ranges. Providing liquidity on Uniswap V3 is an intricate process since it allows for setting a custom price range for a traded asset. Real Yield accounts for this feature as well.
What Makes Real Yield Stand Out
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Thanks to the unique type of smart contracts called Cellars, Real Yield ETH and Real Yield USD are non-custodial solutions, which means that user tokens never change hands. The user always retains full control over their funds, so the entire solution lacks all the risks associated with most DeFi endeavors.
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Another considerable upside of Sommelier’s Real Yield solutions is that they offer considerably higher returns than most similar DeFi solutions.
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On top of that, Sommelier has its own tokens, SOMM, awarded for using its services, including Real Yield. Those tokens can be staked with Everstake or other Sommelier validators to increase the resulting returns from using Real Yield. To make this process easier to go through, you can follow our guides on how to stake SOMM via Keplr or Leap wallets.
Conclusion
Real Yield USD and Real Yield ETH strategies offer investors and DeFi enthusiasts powerful tools to maximize returns even during troubled times, such as the recent banking turmoil in the US. By leveraging stablecoin diversification and optimizing yields on liquid staking tokens, these strategies have the potential to unlock attractive opportunities. As the market evolves, staying informed and adapting to changing conditions will be vital to reaping the benefits of these innovative investment approaches.
If you have any questions, feel free to contact our Sommelier Blockchain Manager on Twitter.
