Thread by @ThyBorg_

I've been using recursive lending & borrowing on @kava_platform to get a 55% yield on $UST paid in $KAVA and $HARD. Here's how that works 🧵

The strategy takes advantage of the fact that the net borrowing rate (after rewards) is higher than the net lending rate. In the case of #Kava, much higher!

One should deposit $UST and borrow $ATOM. Borrowing on Kava needs to be over collateralized so you cannot leverage indefinitely.

The platform has a collateral factor (cf) of 25% for $UST meaning that if you deposit $100 of collateral, you can only borrow $25 worth of $ATOM

However $ATOM itself has a collateral factor (cf) of 50% for meaning that if you deposit $100 of collateral, you can only borrow $50 worth of $ATOM

With a $100 initial lending deposit of $ATOM, one will borrow $50 against it in $ATOM. Those $50 will then be re-deposited and used to borrow $25 (50% of $50)

The formula for infinite number of recursions below. In

In practice you might loop 4-5x times your initial stake as after a certain amount you might want to have some margin of safety on our collateral to avoid liquidations

The exact yield fluctuates with the price of $KAVA. At today's rate it was 56.60% today