# Rage-GMX DN Vaults By [Rage Trade](https://paragraph.com/@ragetrade) · 2022-11-01 --- Rates Increase While DeFi Struggles to Keep Up ---------------------------------------------- Over the past year, traditional interest rates have steadily increased while DeFi yield farming rates have continued to struggle keeping up, despite the recent introduction and explosion of DeFi. ![The current 1 Year Treasury Rate is at 4.66% compared to 0.15% last year. This is higher than the long term average of 2.85%.](https://storage.googleapis.com/papyrus_images/575720ffeab87f186e7abaf9baa0439353dda7ed94b9f97ab9745ea116278def.png) The current 1 Year Treasury Rate is at 4.66% compared to 0.15% last year. This is higher than the long term average of 2.85%. ![Current DeFi yield of Top 5 stablecoin pools by TVL](https://storage.googleapis.com/papyrus_images/69670054756c784ca0947914dd40adf2e64dfa0cef8183c0ad95f547d1730318.png) Current DeFi yield of Top 5 stablecoin pools by TVL Traditionally, DeFi yield has been built on token emissions, options selling, and over/under collateralized lending. But with decreased volatility, these yields have compressed to their lowest point in the last 2 years. Our thesis is that DeFi yield should be built on real demand and real yield. Case Study: GMX --------------- GMX has grown to be the largest stablecoin farm on Arbitrum. By collecting a pool of assets from liquidity providers (LPers) and allowing traders to swap assets and receive perpetual exposure, GMX has grown to over $400M TVL. As users provide liquidity, they are given GLP tokens which represent their share of the liquidity pool. The core thesis behind GMX is that leverage traders: 1. Want deep liquidity 2. Lose money over time The value of assets in the liquidity pool on Arbitrum has grown steadily and traders have incurred $40M+ in losses since inception of GLP. ![Value of assets in the liquidity pool on Arbitrum](https://storage.googleapis.com/papyrus_images/7f97ae05fa1a89476066f8cb9164f1c3de413028e150831d22bad541ab910f37.png) Value of assets in the liquidity pool on Arbitrum ![Traders PnL on Arbitrum](https://storage.googleapis.com/papyrus_images/b2a634c276ec1d9d5e31ac16f7525a030e103765ee508283c2930bac53d1e47d.png) Traders PnL on Arbitrum GLP has become the largest position on Arbitrum. GLP holders have earned between 15-30% APY from fees and have earned $40M+ from trader losses. However, the problem is to earn the yield that traders pay in fees and leverage trading losses, you have to take on ETH & BTC price exposure in the GLP basket which have suffered YTD. Introducing Our Delta Neutral Vaults: ------------------------------------- To solve these problems, we’re introducing Delta Neutral Vaults that turn GMX's GLP into a stablecoin farm by hedging the ETH & BTC exposure and catering to two types of users: the risk-on users and the risk-off users. The **Risk-On Vault** allows users to provide delta neutral GMX liquidity by depositing sGLP or USDC while benefiting from trader losses. The vault hedges ETH & BTC price exposure in GLP by systematically opening short positions on Aave. Additionally, the **Risk-On Vault** provides an extra boost in yield by auto-compounding the ETH rewards into sGLP & restaking earned esGMX. The **Risk-Off Vault** has no liquidation risk or GMX risk and earns interest from lending USDC on Aave. It also earns a fraction of ETH rewards from GLP based on the amount of USDC lent to the Risk-On Vault. Backtest -------- The Risk-On Vault indicates a stable yield of 15-25% APY. By neutralising the market deltas, returns on this vault have mainly derived from auto-compounding ETH rewards into sGLP and the Trader PnL. The Risk-Off Vault yield ranges between 6-8% APY compared to the ~0.5% supply APY on Aave. The source of yield comes from lending interest on Aave and the share of GMX yield. Partnerships ------------ Due to our white-glove approach, our business development efforts have resulted in us securing over $40M+ in LP commitments from stablecoins, money markets, and leverage LPing protocols. That means you can: * Mint a stable against the DN vaults * Lever up (1.5x, 2x, 3x) on DN yield * Borrow assets against DN vaults Partnership Announcements... soon! To ensure the safety of the funds, we are also running a $50k competition now and have secured $10M in coverage for our vaults which will be live on day 1 (courtesy of @sherlockdefi). [**Read Docs**](https://docs.rage.trade/4TdI-overview) [**Follow us on Twitter**](https://twitter.com/rage_trade) [**Join Discord**](https://discord.gg/nYbc3EvTV5) --- *Originally published on [Rage Trade](https://paragraph.com/@ragetrade/rage-gmx-dn-vaults)*