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meUSDC Strategies

3A DAO

 

Mendi meUSDC yield-bearing stable coin is now available as collateral for EURO3 loans in the 3A protocol. Users can borrow EURO3 against their meUSDC without paying any recurring interest. This means users can buy more meUSDC with their borrowed EURO3 and leverage their meUSDC position at zero recurring cost. 

meUSDC is a yield-bearing stable coin. Users receive it when they deposit USDC into the Mendi protocol (https://mendi.finance/) and make it available for borrowing. The interest earned on borrowing accumulates in the meUSDC token and the price of meUSDC increases over time to reflect the yields.

meUSDC Leverage Strategy

Here’s how this strategy works: 

  1. Deposit meUSDC to your 3A vault in the 3A app https://app.3adao.org/vaults
  2. Borrow EURO3
  3. Swap EURO3 for USDC on Lynex https://app.lynex.fi/swap
  4. Deposit USDC and borrow on Mendi https://mendi.finance/ 
  5. Deposit meUSDC to your 3A vault
  6. If you want to increase your leverage, repeat steps 2 – 5
  7. Strategy Spreadsheet (how the strategy performs with different values)

Currently meUSDC has a collateral ratio of 1.1, which means that for every EURO3 borrowed you need to provide 1.1 EUR  worth of meUSDC. The maximum leverage, if you loop this strategy (meaning go over steps 1 – 5 over and over again) is 9. This means that for every EUR worth of initial meUSDC you can hold up to 9 EUR worth meUSDC.  

This leverage ratio also means that the meUSDC yields are significantly increased by this strategy. For example, if the APR on meUSDC is 15.5%, using this strategy the APR would be up to 650% 

When you want to withdraw your meUSDC you need to pay back the respective portion of your EURO3 loan, or provide a different collateral instead of meUSDC. For example, you can replace meUSDC in your vault with ETH, withdraw meUSDC 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 EUR price of meUSDC 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. So keep in mind that the $/EUR exchange rate may change over time and affect the EUR value of your meUSDC collateral. 

meUSDC Staking A3A Strategy 

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

  1. Deposit meUSDC to your 3A vault in the 3A app https://app.3adao.org/vaults
  2. Borrow EURO3
  3. Swap EURO3 for A3A on Lynex https://app.lynex.fi/swap
  4. Deposit A3A to 3A Cashback Pool https://app.3adao.org/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%). 

meUSDC Redemption Strategy

Depending on the HF of your vault, meUSDC 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 meUSDC without incurring any losses (the 1% redemption fee should cover the minting fee and the swap fees). Since the borrowing fee is at 0.5% and the redemption fee is at 1%, every time your vault is redeemed and you buy back your meUSDC, you gain an extra 0.5%.

Here’s a strategy that maximized the gains from the redemptions, A3A rewards and cashbacks:

  1. Deposit meUSDC to your 3A vault in the 3A app https://app.3adao.org/vaults
  2. Borrow EURO3
  3. Deposit EURO3 in the 3A Stability Pool https://app.3adao.org/staking 
  4. Earn A3A rewards from the cashback pool, together with liquidated collateral
  5. If liquidations happen, claim your share of the liquidated collateral from the Stability Pool, convert it to EURO3 and deposit it back to the Stability Pool.
  6. Deposit A3A to 3A Cashback Pool https://app.3adao.org/staking 
  7. Earn cashbacks and use them to mint more EURO3. 
  8. Repeat steps 3-6
  9. If your vault is redeemed, use EURO3 in the Stability Pool to get back your meUSDC and go back to step 1

As mentioned above, 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%). 

About Mendi Finance

Mendi Finance is a decentralized lending protocol for individuals, institutions and protocols to access financial services. It is a permissionless, open source protocol serving users on Linea. Users can deposit their assets, use them as collateral and borrow against them.

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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