Smart Debt Classic

Smart Debt Classic is a variation of the Smart Debt strategy using base tokens as collateral instead of liquid staking tokens. This approach is situational but can outperform when supply incentives are boosted.

Overview

📌 What it is: You supply a base token (like EGLD) and borrow an LP token. This is similar to Smart Debt but foregoes auto-compounding collateral in favor of potentially higher supply APY.

✅ How it works: Same logic as Smart Debt, but now you don't get staking rewards from your collateral. This only makes sense when the base token supply APY is unusually high, making up for the lack of auto-compounding.

💡 Why to use it: When base token supply APY is boosted (e.g., through temporary incentives), this can outperform using an xToken. Common during liquidity mining campaigns or protocol launches.

How It Works

When It Makes Sense

Smart Debt Classic only outperforms when:

Base Token Supply APY > Liquid Staking APY

This happens during:

• Liquidity mining incentives - Protocols boosting supply APY

• New pool launches - High initial rewards

• Governance vote incentives - Temporary APY boosts

• Competitive campaigns - Protocols competing for TVL

Mechanism

1. Supply base token - Deposit EGLD (no auto-compounding)

2. Borrow LP token - Take loan in XEGLD/WEGLD LP

3. LP fees reduce cost - Borrowed LP earns trading fees

4. High supply APY compensates - Elevated EGLD supply rate covers lack of staking

Comparison with Smart Debt

Feature	Smart Debt	Smart Debt Classic
Collateral	XEGLD (staking)	EGLD (base)
Collateral APY	8% (stable)	5-20% (varies)
Borrow	LP token	LP token
Borrow cost	3% - 2% fees = 1%	3% - 2% fees = 1%
Best when	Normal market	Incentive programs
Complexity	Moderate	Lower

Real Example

Scenario: Liquidity Mining Event

Market conditions:

• EGLD supply APY: 15% (boosted by incentives)

• XEGLD staking APY: 8% (normal)

• LP borrow APR: 3%

• LP fee APR: 2%

Smart Debt Classic:

• Supply: $1,000 EGLD

• Borrow: $600 LP

• Returns: (15% × $1,000) - (1% × $600) = $150 - $6 = $144/year

• APR: 14.4%

Regular Smart Debt:

• Supply: $1,000 XEGLD

• Borrow: $600 LP

• Returns: (8% × $1,000) - (1% × $600) = $80 - $6 = $74/year

• APR: 7.4%

Result: Smart Debt Classic wins by 7% APR during incentive period

When to Use

✅ Good scenarios:

• Base token supply APY > 12%

• Temporary incentive programs

• You want simpler mechanics (no liquid staking)

• Short-term yield farming (< 3 months)

❌ Avoid when:

• Supply APY returns to normal levels

• No active incentive programs

• Long-term position (staking compounds better)

• Supply APY < Liquid staking APY

Risk Considerations

Smart Debt Classic has the same core risks as Smart Debt, plus sensitivity to incentive changes.

Unique Risks

1. Incentive Expiration - Boosted APY drops when program ends

2. APY Volatility - Supply rates can change rapidly

3. No Compounding - Missing out on long-term staking growth

4. Timing Risk - Entering late in an incentive period

Monitor These Signals

Watch for incentive program changes:

• Program end dates

• APY trending downward

• Competing for same rewards with more users

• Governance proposals affecting rewards

Calculating Break-Even

When does Classic beat regular Smart Debt?

Base APY - Liquid Staking APY > 0

Example:
EGLD supply: 12%
XEGLD staking: 8%
Difference: 4%

Classic wins when boost > 4%

Net APR Formula

Net APR = (Supply APY × Collateral) - (Borrow APR × Debt) + (LP Fee APR × Debt)
          ────────────────────────────────────────────────────────────────────
                                  Initial Capital

Strategic Timing

Entry Timing

• Week 1-2 of program: Highest APY, best entry

• Week 3-4: APY declining, still profitable

• Week 5+: Consider switching to regular Smart Debt

Exit Timing

• Monitor APY daily during incentive programs

• Set alerts for APY dropping below threshold

• Have exit plan before incentive ends

Transition Strategy

When incentives end, smoothly transition:

From Smart Debt Classic to Smart Debt:

1. Repay LP token loan

2. Withdraw EGLD collateral

3. Convert EGLD → XEGLD

4. Re-supply XEGLD

5. Re-borrow LP token

Or simply exit:

1. Repay LP loan

2. Withdraw EGLD

3. Hold or deploy elsewhere

Real-World Example

xExchange Liquidity Mining Campaign

Program: 4-week EGLD supply boost

• Week 1: 20% APY

• Week 2: 15% APY

• Week 3: 12% APY

• Week 4: 10% APY

• After: 5% APY (normal)

Strategy:

• Weeks 1-3: Use Smart Debt Classic (high boost)

• Week 4: Transition to regular Smart Debt

• Post-program: Continue with Smart Debt or exit

Results:

• Average APY during program: 14.25%

• vs. Smart Debt the whole time: 7%

• Extra yield: 7.25% for 4 weeks

Monitoring Checklist

Daily checks during active position:

• Current supply APY

• Days remaining in incentive program

• Health factor

• LP borrow rate changes

Weekly reviews:

• Compare to Smart Debt performance

• Evaluate transition timing

• Check for new incentive programs

Related Strategies

• Smart Debt - Using liquid staking collateral

• Smart Collateral - LP as collateral

• Liquid Boost - Leveraging staking yields

Smart Debt Classic is opportunistic. It works best during short-term incentive programs. Always have an exit plan when incentives end.

Summary

Use Smart Debt Classic when:

• Base token supply APY is boosted above 12%

• Active liquidity mining programs

• Short-term opportunities (weeks to months)

• You want simpler mechanics

Use regular Smart Debt when:

• Normal market conditions

• Long-term positions

• Liquid staking APY competitive

• Compounding benefits matter

The key is staying flexible and switching strategies as market conditions change.