[Review] The First Positive Sum Defi Protocol on Ethereum Is Getting a Major Update

Sturdy has experienced strong growth over the summer since their Ethereum mainnet launch in June. So far, they’ve provided users with high-yield stablecoin lending and interest-free borrowing, partnered with some of the biggest names in DeFi, and built a strong community.

With this, the project has managed to become the largest lending protocol on Ethereum without a token thanks to their innovative mechanics, reaching a TVL of over $25 million.

As exciting as all of that is, it was just the preseason; they seem to be just getting started and have a ton of developments as part of Sturdy 1.0.

What Is Sturdy: A Quick Breakdown

Think of Sturdy as a decentralized yield farming fund. Strategists (borrowers) can leverage collateral assets like Convex LP tokens; they forgo a portion of the yield to gain up to 10x leverage.

Liquidity Providers (lenders) receive a portion of the yield from borrowers’ farming in exchange for providing liquidity.

This system offers Liquidity Providers the benefits of active yield farming without taking on gas costs, time commitment, and increased risk while allowing Strategists to gain outsized positions to farm with.

While lending protocols rely on the interest of borrowers to incentivize lenders, their unique staking strategy creates a positive-sum game where Strategists get low (typically 0%) interest loans while Liquidity Providers get high yields on their stablecoins.

Why Sturdy ‘1.0’

It may seem strange to call this release 1.0 after being open to the public for several months.

The name represents just how early Sturdy is in its journey to transform DeFi lending; they’ve spent their preseason finding the best possible product-market fit and ensuring they’re providing a unique and valuable protocol.

They’re currently preparing to roll out a number of new features as well as a revamped UI as part of the Sturdy 1.0 launch. Sturdy will be increasing their accepted collateral assets and adding an ETH market to provide users with even more ways to deploy their digital assets.

Speedbumps

As Sturdy continues to travel down its roadmap, there are bound to be a few speedbumps along the way that users should be aware of.

Currently, Sturdy only offers stablecoin borrowing and accepts a handful of CRV/BAL LP tokens as collateral. While the protocol plans to launch an ETH market in the future, users are limited to stablecoin borrowing for the time being.

Sturdy has yet to announce plans to deploy on an L2 and currently operates mainly on the Ethereum mainnet.

While they’ve made strides to reduce gas costs, such as their one-click leverage + deleverage feature, transaction costs can greatly diminish future earnings for smaller portfolios.

Finally, Sturdy’s relatively nascent state, with a market size of less than $30 million, means whales can have an outsized impact on the protocol.

For instance, Sturdy offers 0% interest loans so long as the utilization rate is below 80%; when a massive loan is taken out, that drives up the utilization beyond 80%, both lending and borrowing rates increase to encourage a decrease in utilization.

Thankfully, lenders typically jump at the high yield and quickly add the necessary liquidity to reduce utilization rate, but the market is far more variable than on larger, more well-known protocols such as Aave.

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