Lybra Finance

Aug 17, 2023 • 8 Min Read

What is Lybra Finance?

Lybra Finance is a lending protocol built on Ethereum that utilizes liquid staking derivatives to allow users to borrow against their staked ETH. When depositors supply staked ETH, they can mint eUSD, Lybra’s interest bearing stablecoin, at zero cost, improving capital efficiency and providing interest income.

Investment Thesis

The investment thesis of Lybra is predicated on two main points:

  • Lybra's Product-Market Fit
  • Growth of Ethereum Staking

Lybra Product-Market Fit

Lybra is not the first lending/borrowing protocol, nor is it the first to offer CDPs for staked ETH. Where Lybra sets itself apart is its innovation in providing users with an interest-bearing stablecoin, eUSD. When users borrow against their stETH, they mint eUSD, which pays a native 7.5% yield to holders. The yield comes from accrued ETH staking rewards and is paid via airdropping eUSD proportionately to holders.

The 7.5% yield on eUSD can be paid due to borrowers having to maintain a collateral ratio of at least 150%. The current yield on stETH is approximately 5%, so in a scenario where there is $100 of collateral deposited into Lybra, a maximum of $67 eUSD can be minted. The $100 worth of stETH will accrue $5 worth of staking rewards ($100 * 5% APY) enabling ...

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