DeFi Guide: Borrowing and Lending on Zest with stSTX

Zest Protocol, the lending protocol on Stacks, has integrated stSTX as a collateral asset. Now, users get to enjoy auto-compounding Stacking rewards via stSTX and borrow against it at the same time.

Lending markets are the second biggest DeFi vertical with a $35B TVL across Web3 for a reason.

They enable multiple use cases and DeFi strategies, such as using long-term assets as collateral for borrowing stablecoins that can be deployed in DeFi to earn additional yield.

Right now, there is still a waitlist to access Zest Protocol, but it will be open to everyone soon.

Let’s look into how stSTX holders can use their liquidity on Zest and which new DeFi strategies are unlocked.

Supplying stSTX on Zest

Users can begin by visiting the Zest Protocol website, connecting their wallets holding stSTX, and launching the app.

Within the Borrow section, locate the “Assets to supply” box in the Stacks market and select stSTX as the asset to supply.

After this step, depositors will already boost their Stacking DAO points production by 50% respect to simply holding stSTX.

Simply providing stSTX liquidity doesn’t generate any yield as it’s not borrowable on Zest, but the position will be used as collateral to borrow other available assets.

Borrowing against stSTX on Zest

Now, once the stSTX deposit transaction goes through, you can borrow aeUSDC against it.

To access borrowing, users only need to click the Borrow button for their chosen asset and specify the desired loan amount. Zest provides a comprehensive transaction overview, including the liquidation price.

It’s important to remark that users can only take out an aeUSDC loan valued at up to 50% of their stSTX collateral value. For instance, if someone holds $100 worth of stSTX on Zest, they can borrow up to $50 worth of aeUSDC.

If the loan value surpasses 70% of the collateral’s value, the position is considered under-collateralized and will undergo liquidation. This entails the repayment of the loan along with a penalty of 10%.

Borrowers can always add more collateral to improve their Loan-to-Value factor and, therefore, reduce their liquidation risk.

DeFi strategies enabled by stSTX and Zest

Once users receive aeUSDC tokens, they can deploy the liquidity on other DeFi protocols.

For instance, users could utilize the loan to:

• Deposit the borrowed assets into the Bitflow aeUSDC-sUSDT pool to earn trading fees
• Supply the borrowed aeUSDC on Zest as collateral to earn further APY

As more borrowable assets get listed on Zest, new possibilities will emerge.

These leveraging strategies unlock new use cases and strategies for the Stacks DeFi ecosystem.

Stacking DAO Details:

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