# Liquid Boost

Liquid Boost is a yield optimization strategy that allows you to multiply your staking rewards without taking on price volatility risk. By leveraging auto-compounding tokens, you can amplify returns while maintaining market-neutral exposure.

## Overview

**📌 What it is:**\
You supply an auto-compounding token (like XEGLD) and borrow its base version (like EGLD). This creates a leveraged position that benefits from staking yield while remaining protected from price fluctuations.

**✅ How it works:**\
The token you borrow and the one you supplied move together in price. But the one you supplied is growing over time through auto-compounding rewards. So you're not exposed to price swings, and you're stacking rewards passively.

**💡 Why to use it:**\
You want to leverage exposure on the staking rewards while staying safe from the price volatility. This strategy is ideal for users who believe in the long-term value of a token and want to maximize staking returns without directional price risk.

## How It Works

### Step-by-Step Process

1. **Supply liquid staking token** - Deposit XEGLD (or another auto-compounding token) as collateral
2. **Borrow base token** - Borrow EGLD at a lower interest rate than the staking yield
3. **Swap to liquid staking token** - Convert borrowed EGLD back to XEGLD
4. **Loop** - Repeat the process to multiply exposure (up to your risk tolerance)

### Example Strategy

**Initial Position:**

* Supply: 10 XEGLD (worth 10 EGLD)
* Borrow: 7 EGLD (70% LTV)
* Swap 7 EGLD → 7 XEGLD
* New supply: 17 XEGLD total

**Result:**

* You now have 1.7x exposure to XEGLD staking rewards
* Your liquidation risk is minimal because XEGLD and EGLD prices move together
* Net APY = (Staking APY × Multiplier) - (Borrow APY × Borrowed Amount)

## Real Example

Let's assume:

* XEGLD staking APY: 8%
* EGLD borrow APY: 2%
* Starting amount: 10 XEGLD ($1,000)

**Without Liquid Boost:**

* Annual yield: $1,000 × 8% = $80/year

**With 2x Liquid Boost:**

* Supply 10 XEGLD, borrow 10 EGLD, swap to 10 XEGLD
* Total position: 20 XEGLD earning 8% = $160/year
* Borrow cost: 10 EGLD × 2% = -$20/year
* **Net yield: $140/year (vs $80 without boost)**

## Risk Considerations

{% hint style="warning" %}
While Liquid Boost is market-neutral, it's not risk-free. Be aware of these risks:
{% endhint %}

### Key Risks

1. **Smart Contract Risk** - Protocol vulnerabilities could affect your funds
2. **Depegging Risk** - If XEGLD depegs from EGLD, liquidation becomes possible
3. **Interest Rate Changes** - If borrow rates increase above staking yields, the strategy becomes unprofitable
4. **Health Factor** - Over-leveraging can lead to liquidation if rates change

### Health Factor Management

Maintain a health factor above 1.5 for safety:

* **Health Factor > 2.0** - Very safe, low liquidation risk
* **Health Factor 1.5-2.0** - Safe, moderate buffer
* **Health Factor 1.2-1.5** - Risky, close to liquidation
* **Health Factor < 1.2** - Dangerous, liquidation imminent

## When to Use Liquid Boost

✅ **Good scenarios:**

* Stable staking yields significantly higher than borrow rates
* You want passive income without directional price bets
* You trust the liquid staking token's peg stability
* You plan to hold long-term

❌ **Avoid when:**

* Borrow rates are close to or higher than staking yields
* You need quick access to your capital (unleveraging takes time)
* You're uncomfortable with leverage mechanics
* Market volatility is extreme (even pegged tokens can temporarily depeg)

## Calculating Returns

### Net APY Formula

```
Net APY = (Supply APY × Total Supplied) - (Borrow APY × Total Borrowed)
         ───────────────────────────────────────────────────────────
                         Initial Capital
```

### Example Calculation

* Initial: 10 XEGLD
* Supply after 2x loop: 20 XEGLD
* Borrowed: 10 EGLD
* Supply APY: 8%
* Borrow APY: 2%

```
Net APY = (8% × 20 XEGLD) - (2% × 10 EGLD)
          ─────────────────────────────────
                  10 XEGLD

Net APY = (1.6 XEGLD) - (0.2 EGLD) = 1.4 XEGLD
          ──────────────────────────────────
                    10 XEGLD

Net APY = 14%
```

## Related Strategies

* [Smart Collateral](/multiply/smart-collateral.md) - Earn from collateral while borrowing
* [Smart Debt](/multiply/smart-debt.md) - Earn from borrowed assets
* [Understanding Leverage](/leverage/understanding-leverage.md) - Learn leverage mechanics

{% hint style="info" %}
Liquid Boost is best suited for experienced users who understand leverage and are comfortable monitoring their positions regularly.
{% endhint %}


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