How to optimise your farms
Leveraged yield farming lets farmers optimise their yield farming position, allowing them to borrow liquidity and then put it back into their liquidity to yield farm.
Basically, you can earn income on your tokens by using your LP position to borrow extra liquidity and then reinvest the extra funds. Given that your asset APY is higher than your loan APR, you can boost your profits by 100-200%. Here's how it works.
At the time of writing, the Stability Fee (APR) for your loan if you use an yvcrvUSDN LP position is 2.9%. But you can earn just over 14% APY on your USDP stablecoin by using the same farm (crvUSDN).
So, you can invest USDP in crvUSDN and earn the difference. But, here's the thing – you can then take out another USDP loan and then keep repeating the process.
There is, of course, a caveat – you can't borrow 100% of your LP position. So, with each loan you take out, the amount you can borrow gets smaller.
Finally, if you repeat the process 10 times, the yearly return you can expect is 45% – 3X the base APY of the crvUSDN farm (14%).