Thetanuts Finance, a prominent decentralized on-chain options protocol, has revealed its integration of Pendle Finance’s $PT-eETH offering to establish a Leveraged LRT Strategy Vault on the Ethereum Mainnet. This move represents the protocol’s initial venture into restaking and Liquid Restaking Tokens (LRTs), an increasingly popular aspect of the Decentralized Finance (DeFi) sector, which has amassed over $10 billion in Total Value Locked (TVL) to date.
Increased Staking Returns
Restaking offers DeFi users a means to utilize their staked $ETH for securing alternative networks and garnering supplementary yield beyond what they typically earn on the Ethereum Mainnet. Spearheaded by EigenLayer, this practice empowers users to either restake directly within EigenLayer’s native dApp or opt for a liquid restaking protocol like EtherFi. By staking their $stETH within liquid restaking protocols, users mint “Liquid Restaking Tokens” (LRTs), which can be leveraged to accrue additional yield elsewhere.
Leading the LRT landscape is EtherFi, boasting over $2.5 billion in Total Value Locked (TVL). EtherFi allows users to deposit $ETH, $stETH, $bETH, or $cbETH to mint the $eETH LRT.
Holding $eETH enables users to augment rewards with EigenLayer points and protocol points such as EtherFi Loyalty Points. Additionally, opportunities abound through third-party LRTs, including the innovative Pendle Finance protocol, designed to further enhance $eETH yields by bifurcating it into $PT-eETH and $YT-eETH.
$PT-eETH represents a token that relinquishes $eETH yields and points in favor of earning a fixed ~20% Annual Percentage Yield (APY). Upon maturation, $PT-eETH can be redeemed for $eETH at a 1:1 ratio.
On the other hand, $YT-eETH furnishes DeFi investors with leveraged exposure to $eETH yields and points, streamed to holders perpetually until maturity, after which the token depreciates to zero value. Presently, $YT-eETH holders can accumulate 39 times EtherFi points and 20 times EigenLayer points.
Enhancing the Practicality of $PT-eETH
Pendle Finance has gained prominence for offering the highest fixed yield in the industry for $ETH through its $PT-eETH offering, ensuring complete certainty of returns. However, Thetanuts Finance is introducing a new opportunity for users to potentially boost these yields further with its Leveraged LRT Strategy Vault.
Thetanuts is integrating $PT-eETH into its platform to launch the Leveraged LRT Strategy Vault on the Ethereum Mainnet. Holders of PT-eETH can choose to wait until their tokens mature on June 27 to realize gains or exit their positions earlier if the implied APY is favorable. While waiting for maturation, the Leveraged LRT Strategy Vault offers $PT-eETH holders the chance to earn additional yield by utilizing their tokens to generate extra yields through option premiums and rewards.
In the Leveraged LRT Strategy Vaults, users must “Zap” their $PT-eETH tokens and deposit them into the Thetanuts Finance v3 Lending Market, borrowing $ETH in the process. This $ETH is then placed into the $ETH Call (“ETH-C”) Basic Vault, where it generates additional Basic Vault Option premiums but exposes itself to short volatility risk.
Thetanuts Finance’s Leveraged LRT Vaults enable $PT-eETH holders to leverage a valuable asset that they previously could only hold until maturity, allowing them to generate additional yield through EigenLayer Points, EtherFi Loyalty Points, Pendle $PT-eETH Fixed Yield, Thetanuts Finance $ETH-C Basic Vault Option Premiums, and $NUTS Rewards after the launch of Thetanuts Finance’s governance token.
This innovative offering marks the first time an options market has created a new yield-generating tool for LRT-related staking products, likely to attract strong demand. Currently, there are 150,000 $PT-eETH (worth $577 million) in circulation.
Thetanuts Finance will initially launch its Leveraged LRT Strategy Vault on the Ethereum Mainnet and subsequently integrate other LRT protocols, enabling a similar strategy with other LRTs as collateral assets.
As with all DeFi investments, $PT-eETH short-call vaults entail risks, particularly short volatility risk, which could render deposits worthless if the market for eETH or PT-eETH collapses.
