Innovative Use of Collateral
When users deposit these reward-bearing tokens, they not only strengthen their Collateralized Debt Position (CDP) but also continue to earn the underlying rewards associated with these tokens. This dual-benefit model allows users to 'double-dip' by earning rewards on their underlying asset while benefiting from the stablecoin they borrow against their assets.
Liquid Restaking Tokens (LRTs) are an even more tempting collateral option, with the potential for larger yields due to its unique compounding interest mechanism and increased earnings from securing multiple networks. This feature makes LRTs potentially more attractive, as their increasing collateral value can outrun the borrowed amount quicker, reducing the opportunity cost of not restaking. With the probability of declining ETH staking returns due to an increase in staked ETH supply, LRTs offer a strategic option to increase yield possibilities through restaking. Furthermore, using your restaked assets within the Davos ecosystem opens up avenues for additional financial activity and yield maximization.
This advanced collateral strategy demonstrates Davos Protocolβs dedication to improving DeFi standards, providing consumers with sophisticated options to improve their investment outcomes.
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