Davos Docs
  • 🛬Welcome to Davos
    • Mission and Vision
  • 🌸Davos Explained
    • How Davos Works
      • Dynamic Borrowing and Monetary Policy
      • Minting and Utilizing DUSD
      • Innovative Use of Collateral
      • Dynamic Feedback Loop
    • Price Stability Mechanisms
    • Supported Collaterals
      • Expanding the Utility of Collaterals
    • Liquidations
    • Requirements and Fees
    • Benefits of Using Davos Protocol
  • ⚡Protocol Features
    • Omnichain Functionality
      • Bridge
    • Flash Mint
    • DUSD Savings Rate
  • 📚Guides and Tutorials
    • Provide Collateral
    • Borrow DUSD
    • Deposit in DSR
    • Withdraw DUSD from DSR
    • Bridge DUSD
    • Repay DUSD
    • Withdraw Collateral
    • Track or Start Liquidation
  • 🏛️Community & Governance
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  • 📄For Developers
    • Development Details
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      • Flash Mint
      • veDGT Governance
    • Addresses
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        • DUSD
        • sDUSD
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  1. Davos Explained
  2. How Davos Works

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 Protocol’s dedication to improving DeFi standards, providing consumers with sophisticated options to improve their investment outcomes.

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Last updated 11 months ago

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