Qonstant deployment on Arbitrum One network has recently supported rETH, wstETH, and cbETH tokens. This means that ETH stakers on Rocket, Lido, and Coinbase can use their assets as collateral. Let’s see how this works and what strategies can be used to maximize the efficiency of ETH holdings.
rETH
Rocket is a decentralized Ethereum stacking protocol that allows users with less than 32 ETH to collectively fund new validators and receive rewards. rETH is a liquid staking token that accrues staking rewards over time.
How does it work? When you deposit ETH into Rocket Pool, you receive Rocket Pool’s liquid staking token, rETH, which represents your proportional claim to ETH in Rocket Pool. rETH can be used separately on secondary markets. For example, on Qonstant you can use this asset as collateral and borrow against it.
Learn more about Rocket Pool.
wstETH
wstETH is wrapped stacked ETH by Lido Finance.
On Lido, you can stake your ETH on the Ethereum network and receive stETH. stETH is a transferable rebasing utility token representing a share of the total ETH staked through the protocol, which consists of user deposits and staking rewards.
stETH can be used on secondary markets or wrapped and transferred to such L2s as Arbitrum to be used for DeFi opportunities. On Qonstant, you can use your wstETH as collateral and borrow ETH or USDC against it. Check possible use cases below.
Learn more about wstETH on Lido.
cbETH
When you stake your ETH on Coinbase, you can wrap the staked tokens to cbETH. Coinbase wrapped staked ETH (cbETH) represents your staked Ethereum (ETH) in a tradable form. You can unwrap them at any time.
cbETH provides flexibility to sell, transfer, or use it. You can move cbETH to a personal wallet and trade it outside the Coinbase platform, for example, on Qonstant.
Learn more about cbETH.
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Use cases
Deposit looping
One of the strategies is deposit looping. The essence of it is to use existing tokens, for example, wstETH, as a deposit and borrow more ETH tokens. These ETH tokens are then depositing into Lido protocol, the wstETH tokens received in Lido are used as collateral again, and so on in a circle until the account health allows doing so without the risk of liquidation.
This strategy allows to increase your initial deposit thanks to borrowed assets and get a bigger profit.
Portfolio leverage
This option also means increasing the initial deposit, but in a slightly different way. Using your, let’s say, rETH, you can borrow stablecoins and farm rewards in other protocols by staking or lending tokens there.
If you are a trader, you can use stablecoins to long positions according to your strategy. For example, if you believe that the price of some altcoin will rise in the future, you can buy it now and sell it later, making money on the difference in price.
In all of these cases, the goal is to increase your portfolio and gain additional benefits. Let’s say, the initial value of the portfolio is 1 ETH and the tokens are currently in staking, then thanks to the lending protocols as Qonstant, you can increase it by receiving tokens against your position and using them for farming or trading.
Risk Management
Always be aware of the risks associated with cryptocurrencies:
- Monitor your account health to avoid liquidations.
- Know what you will do in case of a dramatic drop in the price of the asset used as collateral.
- Choose strategies only if you understand how they work, where you earn and where you spend on transactions, etc.
- This article is not a financial instruction or advice and is intended for educational purposes only.