Zest Protocol launched its Levered Bitcoin Staking Vault on the Stacks network with an initial capacity of 10 BTC, offering an automated leveraged strategy designed to amplify bitcoin yield without requiring users to manually manage positions. The vault targets an APY of between 6% and 8%, compared to the approximate net yield of 2.6% that stBTC offers directly.
The mechanism operates through an automated cycle: the user deposits stBTC, which is posted as collateral on Zest Protocol’s lending market to borrow sBTC.
That sBTC is staked into additional stBTC, expanding the position and allowing the process to repeat within the risk parameters defined by the vault. The underlying yield comes from Bitcoin Staking on Stacks, powered by the Proof of Transfer consensus mechanism, which has distributed more than 4,200 BTC in rewards since January 2021, according to the platform’s own data.
stBTC is issued by Stacking DAO and backed by sBTC, with Bitcoin Staking rewards that increase its relative value over time.
The leveraged strategy amplifies exposure to that yield, though it also introduces greater risk: variable borrowing costs, the possibility of liquidation, and exposure to changes in the relationship between stBTC and its sBTC backing. As long as the yield generated by the larger position exceeds borrowing costs, fees, and incentives, Zest’s strategy can deliver returns superior to holding stBTC without leverage.
Source:Â https://www.zestprotocol.com/blog/initial-capacity-for-zest-protocol-levered-bitcoin-staking-vault
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