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ezETH Strategies

3A DAO

Renzo ezETH Liquid Restaking Token is now available as collateral for EURO3 loans in the 3A protocol. Users can borrow EURO3 against their ezETH without paying any recurring interest. This means users can buy more ezETH with their EURO3 and leverage their ezETH position at zero recurring cost. 

ezETH Leverage Strategy 

Here’s how this strategy works: 

  1. Deposit ezETH to your 3A vault in the 3A app Vaults
  2. Borrow EURO3
  3. Swap EURO3 for more ezETH on Lynex Swap
  4. Deposit ezETH to your 3A vault
  5. If you want to increase your leverage, repeat steps 2 – 4
  6. Strategy Spreadsheet (how the strategy performs with different values)

Currently ezETH has a collateral ratio of 1.75, which means that for every EURO3 borrowed you need to provide 1.75 EUR  worth of ezETH. The maximum leverage, if you loop this strategy (meaning go over steps 1 – 4 over and over again) is 2.3. This means that for every EUR worth of initial ezETH you can hold up to 2.3 EUR worth of ezETH.  

When you want to withdraw your ezETH you need to pay back the respective portion of your EURO3 loan, or provide a different collateral instead of ezETH. For example, if ezETH goes up in price and you want to realize these gains, you can replace ezETH with the same amount of stablecoins, withdraw ezETH and sell it. All without having to pay back the EURO3 loan in the vault. 

Keep in mind that every time you loop this strategy, the risk exposure of your vault increases and the Health Factor of your vault decreases. If the price of ezETH goes down, the HF goes down as well. If the HF reaches 1, your vault will be liquidated and you will lose all your collateral. 

At the same time, higher leverage means higher gains if the price of ezETH goes up. If the price goes up by 50% your profit will go up by up to 122%.

ezETH Staking A3A Strategy 

Staking A3A is another strategy you can use. Here’s how it works:

  1. Deposit ezETH to your 3A vault in the 3A app Vaults
  2. Borrow EURO3
  3. Swap EURO3 for A3A on Lynex Swap
  4. Deposit A3A to 3A cashback pool Staking 
  5. Earn cashbacks and use them to repay your EURO3 loan. 
  6. If you want to maximize your stake in the 3A Cashback pool, repeat steps 2 – 5.

Currently A3A deposits in the cashback pool are subject to a 6 months lock. It means that the staked A3A should remain staked for 6 months. There’s an option to withdraw A3A sooner, but the protocol will charge a fee for the early withdrawal (currently at 40%). 

Redemptions

Depending on the HF of your vault, ezETH may be available for redemptions. A redemption happens when someone else pays back some of your EURO3 loan in exchange for the equivalent EUR value of the collateral. The redeemer pays a redemption fee (currently 1%) to your vault, so effectively for every 1 EURO3 they pay back, they only receive 0.99 EUR worth of collateral. This means you can borrow EURO3 again and buy back ezETH without incurring any losses (the 1% redemption fee should cover the minting fee and the swap fees).

Disclaimer: The information provided in this post is intended for educational purposes only. It is not intended to serve as financial advice, and any actions taken based on the content of this post are at the sole discretion of the reader. The views and opinions expressed herein are those of the author and do not necessarily reflect the official policy or position of any organization. Readers are encouraged to conduct their own research and seek professional financial advice before making any investment decisions.

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