This article is from: Bankless; Original author: 0xSim0
Compiled by | Odaily Planet Daily (@OdailyChina); Translator | Azuma (@azuma_eth)
In June, Sonic will distribute 190.5 million S tokens, of which 25% of the rewards can be claimed immediately, and 75% will be gradually released in the form of tradable NFTs. There are two ways to qualify: Points (for network participants) and Gems (for builders), both of which may yield returns far exceeding speculative airdrops.
Are you ready to boost your points? The three strategies shared below may help you capture Sonic's June airdrop more efficiently.
Preparation
To start interacting with the following protocols on Sonic, you need some initial capital to execute interactions, as well as some S to pay for gas fees. You can choose to use any standard EVM wallet (such as Rabby or Metamask) and bridge into Sonic via cross-chain bridges like deBridge.
Strategy 1: Silo Loop Lending
This may be the most popular and relatively simple strategy on Sonic right now, aimed at maximizing point rewards while earning base returns. This strategy will utilize the mainstream lending protocol Silo v2 on Sonic.
The core of this strategy lies in the following operational loop:
Obtain some stS by staking S or exchanging any token for stS on a DEX.
Deposit stS into Silo Finance's S/stS lending market, which will earn you Sonic points, Silo points (points redistributed by Silo through Gems), and returns (stS currently generates about 5% base returns, plus Silo's deposit APY).
Borrow S from the market (if you want to earn returns, the borrowing APY should be lower than the base return rate of stS plus the aforementioned deposit APY).
Exchange the borrowed S for stS.
Repeat from step 2, looping the operation.
Due to the very tight correlation between stS and S, the risk of liquidation when borrowing the maximum amount is low, allowing you to effectively achieve a 20x leverage (applying to both points and base returns), with a loan-to-value ratio (LTV) of about 95%.
For every $1 of stS you deposit, you can earn 8 times Sonic points and 1 Silo point (20x leverage after amplification), while for every $1 of borrowed S, you can additionally earn 0.5 Silo points (also amplified 20x).
Additionally, you currently earn 2% base returns through stS deposits. If the borrowing rate for S is too high or the deposit rate for stS is too low, you can also reverse the loop (deposit S, borrow stS).
Note: This strategy can also be used on Euler, but due to the 90% LTV limit, the leverage is only 10x. However, Euler's operations are simpler, making it suitable for users seeking convenience.
Strategy 2: Euler Finance + Rings Protocol Combination Strategy
This strategy will utilize two major protocols: Euler Finance and Rings Protocol.
Euler is another lending protocol that has expanded to Sonic and has provided additional incentives for the network; Rings is a new asset protocol on Sonic that currently supports USDC, ETH, and BTC. Users can deposit these assets into Rings (which will then be deposited into the Veda strategy vault to earn returns) and mint Rings versions of liquidity derivative tokens, which can be staked/locked for additional returns or used within the Sonic ecosystem.
The highlights of this strategy are as follows:
Minting Rings liquidity derivative tokens can earn Sonic Points and Rings Points (i.e., Gems);
These Rings assets can be used across major protocols on Sonic to earn returns + incentives;
Euler provides a one-click loop lending feature, allowing for quick acquisition of 10x leverage in highly correlated strategies.
The specific operational steps are as follows:
Choose a market on Euler that currently enjoys additional incentives (such as USDC.e/scUSD or scETH/wstscETH).
Compare the maximum ROE on the Euler strategy page to decide which assets to deposit and borrow.
If you choose to deposit Rings version of liquidity derivative tokens, you need to mint them first in the Rings protocol.
Use Euler's Multiply feature for one-click loop lending to achieve the desired leverage.
This strategy also enjoys other additional opportunities, such as the rumored airdrop from Rings, which adds more expected returns to this strategy.
Strategy 3: Shadow LP
Shadow is one of the most commonly used decentralized exchanges (DEX) on Sonic. It has huge trading volume and an interesting economic model, providing liquidity on Shadow can earn native token SHADOW, Sonic points, and Gems incentives.
First, let's review the first two strategies. If a large number of users choose to loop lend their S/stS on Silo and other protocols, where will they exchange these assets?
The answer is Shadow!
If they frequently perform such operations, it will generate a large amount of trading fees, which will belong to liquidity providers. Additionally, liquidity providers can also earn Sonic points, Sonic Gems, and SHADOW token rewards, naturally forming a highly capital-efficient strategy.
Under the most aggressive price range settings (which can be done due to the high correlation between S and stS), this pool currently offers 169% APR and 16 times Sonic points.
It is worth noting that you can also use vfat.io (a liquidity management tool supported by Sickle, now compatible with Sonic and Shadow) to automatically balance LP positions, and you can perform one-click entry and exit, automatic compounding, etc., but it is currently uncertain whether Sonic points can be earned through this method.
Hedging Insurance
The above strategies mostly rely on volatile assets like S or ETH, and if the prices of these assets drop, it may severely impact actual return rates, even leading to losses. Therefore, we need to perform some hedging operations.
The specific methods are as follows:
Open a short position with 1x capital on perpetual contract exchanges. If the price drops, the profit from the short position will offset the capital loss from the airdrop strategy.
Sometimes these perpetual positions can also earn (or pay) funding rates.
Recommended platforms:
HyperliquidX: Supports S trading (needs to be cross-chain from Arbitrum).
Vertex protocol: A relatively new perpetual contract exchange running directly on Sonic.
It is important to note that this hedging mechanism will sacrifice potential profits from price increases of tokens like S while mitigating losses.
Looking Ahead
Opportunities to earn points and returns on Sonic will continue to increase. With new protocols launching on-chain every day, such as the rumored Pendle that will soon deploy on Sonic (Odaily note: it has actually been deployed, and you can participate in the "More Suitable Lazy U-Based Financial Strategy (Issue 2)" to efficiently earn points with stablecoins), more new strategies will emerge.
For users intending to cultivate Sonic's June airdrop, it is essential to keep an eye on the development trends of this ecosystem in real-time and timely seek and adjust the most efficient "point farming" operations.
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