Stella

Lending

Stella is an innovative leveraged strategies protocol that enables zero cost borrowing through realigned lender and borrower incentives.

Risk Rating
Average
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Stella's Pay-As-You-Earn model is a game changer in DeFi, offering lenders the ability to leverage DeFi strategies at zero borrowing cost.
What we like less
While Stella's high leverage potential is attractive, it also magnifies risks, especially in volatile markets. Further, all positions have a max duration of 30 days, after which they become liquidatable, adding pressure on leveragers to actively manage their positions within a constrained timeframe.
What it means for you
Stella represents an innovative approach to leveraging and lending in DeFi. It's a great opportunity for experienced DeFi users to maximize their yields.
Information
Exploit/Hacks
None
Info
  • Website
  • Token: ALPHA
  • Tags: Lending
Key Metrics
  • TVL: $8.1M (Rank #156)
  • TVL Ranking by Lending: #0
  • Blockchain: Arbitrum
  • Chain TVL
    • Arbitrum: $8.11M
Risk Assessment
Average
Protocol Code Quality
  • Code reviewed by several experienced auditorsincluding PeckShield and Trust Security
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched in 2023; maturity over nine months reduces technical risk as smart contracts are sufficiently battle-tested
  • Top 20% by total value locked slightly reduces risk
  • Multisig wallet controls protocol upgrades
  • Multisig consists of less than 4 signers, which makes the protocol more susceptible to centralization risks
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
  • Robust controls to mitigate oracle price manipulation
  • Cross-collateral markets are exposed to systemic risks as each asset creates incremental risks for the platform as a whole
  • Solid controls in place to prevent risky borrowing
  • Solid mechanisms in place to ensure healthy liquidations
  • Basic method to accrue protocol reserves
Things to know about Stella

How Stella works

Stella revolutionizes the DeFi lending and borrowing landscape with its Pay-As-You-Earn (PAYE) model, effectively nullifying the traditional borrowing costs associated with leveraged DeFi strategies. This model is distinct in that it focuses on yield sharing between two primary user groups: lenders (contributors to the lending pool) and leveragers (borrowers leveraging DeFi strategies). Stella Strategy: At the heart of Stella's operations are the leveragers who engage in various leveraged strategies built atop multiple DeFi protocols. Unlike traditional lending models where borrowers are charged interest based on loan utilization, Stella's leveragers are exempt from any borrowing cost. Instead, they share a portion of the yield they generate upon closing their positions. This unique approach ensures that if leveragers don't realize any gains, they're not burdened with additional costs beyond repaying the borrowed amount. The range of strategies available caters to different risk appetites and market outlooks, from aggressive high-yield strategies (Hyper-Strategy) to more conservative, established approaches (Standard Strategy). Stella Lend: On the other side of the equation are the lenders, who provide the liquidity necessary for these leveraged positions. Lenders deposit their assets into Stella's lending pools and, in return, receive a share of the yields generated by the leveragers' strategies. This setup allows lenders to potentially earn higher returns than standard lending protocols, as the lending APY isn't capped and is directly tied to the success of the leveragers' strategies. Moreover, Stella Lend's system is designed for simplicity and ease, allowing lenders to earn passive income without needing to understand the complexities of the leveraged strategies being employed. To maintain the protocol's sustainability and reward lenders for their liquidity contributions, Stella implements a 30-day expiry on positions. This mechanism ensures that positions are actively managed and that yields are realized and distributed within a reasonable timeframe, aligning with the PAYE model.

How Stella makes money

Stella earns revenue by collecting a portion of the yields generated by leveragers. Specifically, 25% of these shared yields are taken as protocol fees. Half of these fees are distributed to ALPHA stakers, while the other half goes to depositors of Alpha Homora.

How you make money on Stella

As a user of Stella, you can earn money in two primary ways. As a leverager, by executing leveraged strategies without borrowing costs, you can potentially earn higher yields. However, a portion of your yield will be shared with lenders. As a lender, by lending your assets on Stella Lend, you receive a share of the yields generated by leveragers. This could potentially offer higher returns than traditional lending protocols, given the absence of a cap on lending APY.