Sommelier Finance launches Real Yield ETH Vault

Sommelier Finance announced the launch of a new ETH liquid staking token vault called Real Yield ETH.

Working in collaboration with Seven Seas Capital and DeFine Logic Labs, this new vault is designed to generate yields on liquid staking tokens like rETH, stETH, and cbETH through two primary techniques: leveraged staking on Aave and Compound, and providing liquidity on Uniswap V3.

What is leveraged staking? Essentially, users exchange ETH for an ETH-denominated Liquid Staking Token (LST), then use the LST as collateral on Aave or Compound to borrow more ETH and repeat the cycle.

By leveraging their LST holdings, users can increase the amount of ETH they are staking and thus earn more staking rewards. However, this also increases their risk, as they're exposed to liquidation risk if the value of their collateral drops too low.

The Real Yield ETH vault has a minimum 1.05 health factor during each rebalance to help mitigate this risk. Plus, it closely monitors on-chain conditions to adjust leverage ratios if market conditions change.

As a Liquidity Provider (LP) on Uniswap V3, the vault will LP to ETH/ETH-denominated LST trading pairs. To maximize returns and minimize impermanent loss, the vault uses a sophisticated off-chain computation system to dynamically adjust the tick ranges at which it LPs.

Unlike existing index tokens, which depend on how much commission validators or protocols are taking, Real Yield ETH is a yield-weighted index.

The more yield a particular strategy can receive, the more it will take from the index.

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