I've seen a few people asking about $LUNA derivatives and strategies to profit off of them. A 🧵 covering:
- $bLUNA
- $nLUNA
- $LunaX
- $vLUNA
- $pLUNA + $yLUNA
- $bLUNA
- $nLUNA
- $LunaX
- $vLUNA
- $pLUNA + $yLUNA
$bLUNA (bonded $LUNA):
Bonded assets are essentially liquid staking derivatives of Proof-of-Stake (PoS) Assets. All staking rewards are automatically converted to $UST and claimable in @anchor_protocol's bond tab (claim).
Bonded assets are essentially liquid staking derivatives of Proof-of-Stake (PoS) Assets. All staking rewards are automatically converted to $UST and claimable in @anchor_protocol's bond tab (claim).
Example:
A user bonds their $LUNA and receives $bLUNA at a 1:1 ratio. Behind the scenes, their $LUNA has been staked and is now earning transaction fees occurring on the terra network.
A user bonds their $LUNA and receives $bLUNA at a 1:1 ratio. Behind the scenes, their $LUNA has been staked and is now earning transaction fees occurring on the terra network.
All fees earned are converted $UST and distributed to the holder of the $bLUNA token, this may be a wallet address, or a smart contract such as Anchor’s collateral contract.
The main downside of holding $bLUNA is the fact that you are not eligible for airdrops which are distributed to $LUNA stakers.
bAssets’ main use case is on @anchor_protocol, where users can borrow against deposited bAssets at a maximum Loan-to-Value (LTV) ratio of 60%, this means the value of the loan can be a maximum of 60% of the collateral value.
$bLUNA can also be deposited into @NexusProtocol. When depositing $bLUNA into Nexus, you will receive $nLUNA, a $LUNA derivative representing ownership of $bLUNA locked in Nexus vaults, you will also receive a yield of ~8.8% paid out in $Psi.
Example:
A user takes their $bLUNA to @NexusProtocol to earn a yield. They deposit their $bLUNA into the Nexus vault. In the background, Nexus is borrowing $UST against this $bLUNA through Anchor and then depositing this borrowed $UST into Anchor’s earn tab for a 20% APY.
A user takes their $bLUNA to @NexusProtocol to earn a yield. They deposit their $bLUNA into the Nexus vault. In the background, Nexus is borrowing $UST against this $bLUNA through Anchor and then depositing this borrowed $UST into Anchor’s earn tab for a 20% APY.
This 20% APY is then used to buy and distribute $Psi to $nLUNA holders.
$LunaX is similar to $bLUNA, providing users with liquid staking. As discussed earlier, $bLUNA comes with downsides:
1. Yield is converted to $UST
2. Holders are not entitled to Airdrops
$LunaX fixes this.
$LunaX is similar to $bLUNA, providing users with liquid staking. As discussed earlier, $bLUNA comes with downsides:
1. Yield is converted to $UST
2. Holders are not entitled to Airdrops
$LunaX fixes this.
Rather than converting all staking rewards to $UST, $LunaX converts it to $LUNA and continuously re-stakes it, providing a higher APY. $LunaX also retains its entitlement to $LUNA airdrops.
Example:
A user deposits $LUNA into @staderlabs’ liquid staking contract and receives 1 $LUNA worth of $LunaX. $LUNA is then staked to a set of network validators and will start earning staking rewards and airdrops.
A user deposits $LUNA into @staderlabs’ liquid staking contract and receives 1 $LUNA worth of $LunaX. $LUNA is then staked to a set of network validators and will start earning staking rewards and airdrops.
Staking rewards in the form of $LUNA, $UST, $KRT and so on, are used to buy more $LUNA which is then re-staked to increase the value of $LunaX in relation to $LUNA.
It’s worth noting that $LunaX will not stay at a 1:1 ratio with $LUNA. Like $aUST appreciates in relation to $UST, $LunaX will appreciate in relation to $LUNA. This means that if $LUNA’s staking yield stays at ~10%, we could expect 1 $LunaX to equal 1.1 $LUNA a year from now.
You may now be asking yourself; how can I profit off of these different $LUNA derivatives?
One of the big opportunities is arbitrage. Arbitrage refers to a risk-free profit.
One of the big opportunities is arbitrage. Arbitrage refers to a risk-free profit.
If you want to make an arbitrage profit on the three derivatives mentioned above ( $bLUNA, $nLUNA and $LunaX), I recommend reading this short 🧵 on the strategies to use.
If you find these strategies over-complicated or find that they take too much time, I wouldn’t be concerned. @WhiteWhaleTerra is coming soon and will provide users with the ability to arbitrage with little to no effort or technical know-how.
This brings us to our fourth $LUNA derivative, $vLUNA. If you’re wanting to reap the benefits of $LUNA arbitrage, you can deposit your $LUNA into White Whale’s $LUNA arbitrage vault, where their bots will automatically arbitrage $LUNA and its derivatives.
By depositing into this arbitrage vault, you’ll receive $vLUNA. As this vault participates in arbitrage activities, $vLUNA can be expected to increase in price relative to $LUNA (Similar to $LunaX) as it has the right to claim the underlying $LUNA and its arbitrage profits.
Last, but definitely not least, we have $pLUNA and $yLUNA which represent the principal and yield components of staked $LUNA. The $yLUNA token has a claim over any yield produced by the staked $LUNA while the $pLUNA token has the claim to everything other than the yield.
It’s best explained by an example:
A user deposits $LUNA into @prism_protocol, where it is staked to a set of trustworthy validators to earn a yield. The user then receives the corresponding $pLUNA and $yLUNA tokens.
A user deposits $LUNA into @prism_protocol, where it is staked to a set of trustworthy validators to earn a yield. The user then receives the corresponding $pLUNA and $yLUNA tokens.
While the $yLUNA token must be staked to receive staking rewards (no lockup), the $pLUNA token can be used elsewhere to increase capital efficiency.
I’ll have a separate 🧵 coming out on $pLUNA and $yLUNA within the next few weeks as the range of benefits provided by these two derivatives is insane and how they’re priced is relatively different in comparison to other $LUNA derivatives.
It’s worth noting that $vLUNA, $pLUNA and $yLUNA are yet to launch, so please don’t go to terraswap and buy scam coins.
Another cool fact is $vLUNA, $pLUNA and $yLUNA can all be arbitraged, further benefiting $vLUNA.
Hope you enjoyed :)
Another cool fact is $vLUNA, $pLUNA and $yLUNA can all be arbitraged, further benefiting $vLUNA.
Hope you enjoyed :)
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