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
Supply liquid staking token - Deposit XEGLD (or another auto-compounding token) as collateral
Borrow base token - Borrow EGLD at a lower interest rate than the staking yield
Swap to liquid staking token - Convert borrowed EGLD back to XEGLD
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
While Liquid Boost is market-neutral, it's not risk-free. Be aware of these risks:
Key Risks
Smart Contract Risk - Protocol vulnerabilities could affect your funds
Depegging Risk - If XEGLD depegs from EGLD, liquidation becomes possible
Interest Rate Changes - If borrow rates increase above staking yields, the strategy becomes unprofitable
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
Example Calculation
Initial: 10 XEGLD
Supply after 2x loop: 20 XEGLD
Borrowed: 10 EGLD
Supply APY: 8%
Borrow APY: 2%
Related Strategies
Smart Collateral - Earn from collateral while borrowing
Smart Debt - Earn from borrowed assets
Understanding Leverage - Learn leverage mechanics
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