blockworks.co
DeFi protocol Sommelier announced the launch of a new ETH liquid staking token vault called Real Yield ETH on Wednesday.
Real Yield ETH is the brainchild of strategy provider Seven Seas Capital and Web3 data analytics firm DeFine Logic Labs.
The vault is designed to generate yields on liquid staking tokens including rETH, stETH and cbETH through two primary techniques: leveraged staking on Aave and Compound, and providing liquidity on Uniswap V3. The protocol is expected to make more tokens available on Real Yield ETH in the future.
“The original foundational idea behind real yield ETH was having an index of the best yield on ETH,” Stephen Henkel, the CEO of Define Logic Labs, told Blockworks.
Existing index tokens peg their holders to the validation yield and are dependent on how much commission validators or the protocols are taking, Henkel said.
In the case of Real Yield ETH, which is considered a yield-weighted index, the more yield a particular strategy can receive, the more it will take from that index.
“As a strategy reaches its soft cap of TVL, the incoming TVL can go into other strategies, so it is continuously weighed in such a way that it can take in more and more TVL,” Henkel said.
Although Real Yield ETH is built on top of Sommelier — which is part of the Cosmos IBC, it is an ERC-4626 vault and will live on the Ethereum blockchain.
Sommelier helps these unique strategies come to life as the technology enables “Uniswap V3 tick optimization, really tight leverage loops and taking multiple positions across multiple assets and protocols,” Sun Raghupathi, the co-founder and CEO of Seven Seas, told Blockworks.
Blockworks Research Analyst David Rodriguez notes that “Sommelier’s strategy of leveraging an app-chain to optimize the Ethereum DeFi experience that offers non-custodial, institutional-grade mid-frequency strategies that change with on-chain market conditions is a 0 to 1 improvement on yield aggregation protocols like Yearn Finance.”
“Based on (unofficial) backtested models, RealYieldETH should be able to scale to over $60M TVL while providing ~13%+ APY without liquidity incentives,” Rodriguez said. “This is >2x yield than the next competing ETH-based yield opportunity offered by Frax’s sfrxETH product.”