The long-anticipated Ethereum merge is scheduled to take place in less than a month! The merge has been the talk of the town for what feels like forever; everyone from influencers to developers to newsletters has discussed ‘the merge.’
The merge will alter the mechanisms of how the Ethereum blockchain functions, shifting it from Proof-of-Work to Proof-of-Stake consensus. In a Proof-of-Stake consensus model, validators are used rather than miners to validate network transactions and keep the network running.
This is important for two main reasons; the switch to proof-of-stake will drastically drop the network’s energy consumption(>99.5%), and the fees which were once paid out to miners will now be diverted to validators. The latter is great news for those involved in DeFi strategies incorporating ETH staking, such as Sturdy users.
What the Merge means for Sturdy
Sturdy’s stablecoin lenders can expect a healthy bump in their yields following the merge. Sturdy is particularly primed to benefit from the merge due to the protocol’s unique staking mechanics, where deposited collateral is staked, and the resultant yield is distributed amongst lenders.
With Sturdy, only stablecoins can be lent or borrowed; all other assets are used as collateral. Collateral assets are staked; the staking yield is periodically harvested and used to provide interest to lenders. So if stablecoins lenders are earning 8% APY, it’s not because borrowers are paying 8% interest (typically, they pay nothing at all); rather, it’s because the collateral deposited by borrowers is generating 8% APY.
Once the merge switches Ethereum from Proof-of-Work to Proof-of-Stake, and validators begin to receive rewards previously reserved for miners, staking ETH will be far more incentivized, as it will be the means to secure the Ethereum network. This fits perfectly into Sturdy’s mechanics.
Since much of the yield offered to collateral and stablecoin lenders is generated through staking ETH, stablecoin lenders on Sturdy will be able to benefit from staking rewards without holding ETH. This is great for DeFi users who want to take advantage of staking incentives without taking on large exposure to ETH’s price action and increasing their risk of liquidation in the event of a market downturn.
Sturdy is already offering far more compared to traditional financial institutions and is offering real yield in contrast to many other DeFi platforms. The protocol currently offers a greater yield on stablecoins than other major lending platforms, currently sitting at 6% for USDC, DAI, and USDT, and is only set to increase following the merge.
Get yourself prepared
The merge will amplify the benefits of Sturdy’s unique approach to borrowing and lending by boosting stablecoin lenders’ yields. We’re expecting the Sturdy community to continue to grow as DeFi users scramble to concoct strategies to best navigate the switch to Proof-of-Stake and look for ways to gain exposure to staking without locking up their liquidity or taking on unnecessary risk.
While there’s no way to know exactly when Ethereum’s Total Terminal Difficulty will reach 58750000000000000000000, initiating the merge, we know it’s estimated to occur on either the 15th or 16th of September.
That’s plenty of time to familiarize yourself with Sturdy and get in position to reap the rewards of increased yields following the merge!
About Sturdy
Sturdy is a first of its kind DeFi protocol for interest-free borrowing and high-yield lending. Rather than charging borrowers interest, Sturdy stakes their collateral and passes the yield to lenders. This model changes the relationship between borrowers and lenders to make Sturdy the first positive-sum lending protocol. Sturdy is live on Ethereum mainnet and Fantom Opera.
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