I want to ask a stupid question about LSD APR.

Hi sam, I don't understand this part "If interest rates spike & it's unprofitable for you, simply eject/repay your debt. Remember your debt is in validators, not ETH. " By repaying debt, does it means you stop the borrowing after paying interest?

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04.06.2023

Avi ✨

Poop Man💩 (Henry)
Hi sam, I don't understand this part "If interes...

Borrowers have to pay interest, if the interest grows above the staking reward making it unprofitable to run the validator, you can simply repay the outstanding amount on your loan and then eject your validator.

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04.06.2023

Sam Kazemian ¤⛓️¤

Avi ✨
Borrowers have to pay interest, if the interest gr...

That's correct. It's important to realize that "repaying the outstanding amount" is always just ejecting your validator since that's what you were borrowing. So repayment is simple. You don't need to go buy ETH or anything. If you put up 2E as collateral and borrowed 30E to spin up a validator, you owe a debt of 30E. By ejecting your validator, you simply repay the 30E and get your 2E of collateral back.

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04.06.2023

pyk

Sam Kazemian ¤⛓️¤
That's correct. It's important to realize that "re...

AFAIK there will be only 8 validators queue exit per epoch, wondering how this is playout when there is surge of validators exiting the pool?

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04.06.2023

Poop Man💩 (Henry) Автор вопроса

Sam Kazemian ¤⛓️¤
That's correct. It's important to realize that "re...

Very clear

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04.06.2023

Sam Kazemian ¤⛓️¤ · Accepted Answer

Sam Kazemian ¤⛓️¤

It means that an LSD protocol that requires collateral to run a node (like Rocket Pool) will always yield less APR than an LSD protocol that doesn't require collateral from its node operators (like Lido & frxETH v1).

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04.06.2023

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I want to ask a stupid question about LSD APR.

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