Fully decentralised idea for ~4% yield on USDC

Hi everyone,

I came up with a smart contract idea to generate yield on stable coins and I want to get it sense checked.

Essentially, it boils down to taking advantage of staking yields, but guaranteeing a stable currency.

It involves 2 processes - firstly, selling super leveraged eth tokens and secondly, taking in USDC and issuing yUSDC - which has a stable value of 1 USD and also generates yield.

Here’s the process it would use to work.

Lets start off with $5500 of USDC deposited into a smart contract - “you” are the contract

Take 1000 USDC, lock it up, and create $1000 dollars of 5x longs (perp swaps) in erc 20 tokens. In general we can call this leverage “L” (here L = 5)

You can always guarantee that the cumulative value of the shorts and longs is 1000 as they cancel each other out.

Next you sell the 10x long tokens making $1000 instantly. You owe $1000 leveraged at 5x to the wider blockchain so you need to hold assets equivalent to this amount of leverage - which can be accomplished by holding $5000 of ethereum.

You can stake that ethereum and get 4% on it.

As long as the value of the ethereum being held is L x the value of the ethlongs sold the value of the pool is stable and the ethereum can generate yield.

In principle you have set up a system that holds enough eth long and short (as you keep the -10x leverage shorts, but can generate APY with the longs.

I wouldn't be surprised if this exists so lmk about these projects so I can stake my USDC :)