[Review] How This Project Is Making Low-Risk High APYs Possible via Liquidity Mining

Sturdy Finance, the first positive-sum DeFi lending protocol, has offered high yields for borrowers and lenders since its launch. Over the past 30 days, USDC lenders have earned over 16% APR. And borrowers aren’t getting the short end of the stick with the ability to earn over 80% when leveraging Convex stETH LPs.

But, the fact remains that many users hesitate to join Sturdy because of the protocol’s lack of liquidity. Prospective lenders worry there won’t be enough liquidity to withdraw their deposits while borrowers might find there is little to borrow and high gas fees make small loans impractical. Plus, with little liquidity, both deposits and loans can have a significant effect on platform APYs.

Now, Sturdy has answered user needs by launching its first governance proposal that includes a radically new form of liquidity mining.

Existing Liquidity Mining Models

To understand what makes Sturdy’s model so innovative, let’s first take a look at the typical model. On many protocols, a fixed percentage of tokens are emitted over a certain period. There are two main problems with this approach: 1) Protocols tend to release too many tokens, causing low utilization and 2) When emissions are given to collateral assets, users can fold or loop, not serving users on the protocol.

How is Liquidity Mining on Sturdy Different?

To address these challenges. Sturdy has launched dynamic emission liquidity mining. Instead of following the fixed emission model, emissions are determined weekly based on the current utilization rate. As a result, Sturdy can now attract liquidity without over-emitting.

How exactly can emissions vary based on utilization rate? If utilization dips below 50%, emissions will be reduced by 10% of the initial rate. On the other hand, if utilization exceeds 70%, emissions will increase by 10% of the initial rate. But, if the utilization rate is in the sweet spot of around 50-70%, the emissions rate won’t change.

This model incentivizes lending when utilization is high enough that borrowers might be adversely affected while at the same time maintaining the treasury. Treasury longevity ensures the protocol has the resources to continuously evolve, respond to unforeseen challenges, and mitigate the risk of token price volatility. Overall, it allows for a more stable ecosystem.

The dynamic emission model also allows Sturdy to support its short and long-term goals: The protocol can increase liquidity and promote wider use of the protocol while also maintaining that liquidity over the long term. Thus, it can continue to attract and retain users.

DeFi’s Best Yield Farmers

Sturdy Finance's dynamic emission liquidity mining is a game-changer for DeFi lending. By adjusting emissions based on utilization rates, Sturdy attracts liquidity without over-emitting, protecting lender deposits and maintaining healthy liquidity. This incentivizes lending during peak utilization while promoting wider protocol use.

Sturdy's innovative liquidity mining makes it a top choice for yield farmers seeking high APYs with low risk. With its first governance proposal approved and live, now is an ideal time to join the community.