Regardless of anything and everything, whatever method users apply to earn leads to one key factor: the Net APY. The low borrowing rate and high deposit rate, giving high Net APY, are the starting point of any profit and have been used in various strategies. In fact, most significant transactions happened utilizing strategies with high Net APY.
The unrevealed design of Backlash V2 maximizes users’ profit by utilizing numerous strategies with customizable options. Before our official launch, we wished to let everyone get familiar with the utilization of strategies and to catch the eyes of strategists wandering Twitter (which could be the primary purpose…). Starting from sharing strategies with the classic and basic combination of low borrow and high deposit interests, calculating Net APY, leveraging, and evaluating the risks.
Find collateral asset with the highest deposit interest rate for depositing as collateral
Find a borrow( Debt ) asset with the lowest borrowing interest
Calculate Net APY using the formula:
Net APY = Deposit interest - ( Borrow interest x LTV )
Calculate maximum leverage multiplier:
Max leverage multiplier = LTV / 1 - LTV
Calculate maximum leveraged Net APY:
Max leveraged Net APY = Max leverage multiplier x Net APY
Using two assets with found Net APY, maximize the APY using leveraging methods:
Looping
Borrow the maximum amount of tokens possible from your collateral corresponding to LTV.
Re-deposit to the pool the amount of tokens you borrowed from step 1.
Borrow the maximum amount of tokens possible against the re-deposit you made in step 2.
Continue to alternate borrowing and re-depositing, decreasing each round due to the LTV. Until you reach the maximum leveraged multiplier/maximum leveraged Net APY.
Flash Leverage
Initiate (Max leverage multiplier x Initial deposit) worth of flash loan.
With an initial deposit and (Max leverage multiplier x Initial deposit) from the flash loan in Step 1, deposit (Initial deposit + (Max leverage multiplier x Initial deposit)) to any random lending protocol.
Using your total deposit (Initial deposit + Flash loan) from Step 2, a loan of is (Max leverage multiplier x Initial deposit) is extracted, which is your maximum borrowing amount (LTV) of the deposition.
The flash loan in Step 1 is then closed using the borrowed amount from Step 3.
Amount of Flash loan you have to open = Max leverage multiplier x Initial deposition
For those who are familiar with flash loan leverage coding, flash leverage is recommended; however, although it might lead to higher gas costs, using looping does not affect your maximum leveraged Net APY, so both are possible.
A transaction-building tool called “Furucombo” or a streamlined leverager “Contango” can be used when trying flash leverage methods for Aave and Compound.
Anyone willing to know a detailed explanation of flash leveraging and Looping, refer to the link here.
Calculating max leveraged position liquidation price of each asset:
Deposit asset liquidation price = LTV x current Deposit asset price/LT
Borrow asset liquidation price = LT x Current borrow asset price / LTV
Risk management is much simpler by knowing the price of the asset being liquidated.
Exit position before the price of each borrowing and deposited asset reaches its liquidation price or when Net APY turns negative. ( The liquidation scenario we have analyzed is only based on the price change of the assets. )
Most of our strategies, which will be shared initially, will follow this format. If you wish to check out what kind of strategies will be shared, join our Backlash Discord and react to our announcement. Your dear role will be given to have access to the closed strategy channel. See you there!
About backlash
Backlash is a lending protocol designed for strategists, with a singular focus on enhancing net APY, offering straightforward choices and flexible options to make it easier than ever to make the most out of lending protocols scheduled for launch towards the end of this year or early next year. Stay tuned for more information.
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