DeFi borrowing platforms all started with very basic assets as collateral for loans: BTC, ETH, USD stablecoins, ...

Over the last years, the space has become much more composable and now most basic tokens can be used in DeFi to provide liquidity and earn trading fees along with other incentives.

In many cases, these operations add only very limited risk compared to the original tokens, while still enabling to generate subsequently higher yields.

In our mission to push DeFi composability further and create more utility for all DeFi users through agEUR, we have worked on a general framework to support any type of productive / staked asset as collateral of the Borrowing module!

People will soon be able to borrow agEUR while still earning the rewards of their Curve LP tokens. Face no opportunity cost or fees on your rewards, just increase your borrowing power with what would have otherwise remained idle!

This new framework comes with a smart routing system that makes it super easy for anyone to get access to the staked asset of their choice.

Get ready to hop on to the Convex or the StakeDAO token of your choice in a single transaction from any underlying token! Our system will make sure that you’re getting the most efficient routes and paying the smallest fees possible.

Enabling productive assets to be used as collateral brings many advantages to traditional borrowers of agEUR, and to owners of the so-called productive assets.

Among others, agEUR borrowers can earn more from their collateral than what they pay as interest on their debt. This makes borrowing agEUR completely painless thanks to the returns from those collateral assets. It also comes with the fixed borrowing cost of agEUR, making the returns more predictible than with most other similar solutions.

On top of that, holders of the different assets available as collateral will be able with this system to leverage their exposure to earn more incentives. This feature relies on the same mechanism as the Leverage on vaults: it borrows agEUR from collateral and swaps it into more collateral to increase exposure.

Let’s say that Alice want to leverage her FRAXBP (FRAX+USDC Curve pool). She would hold FRAXBP tokens in a vault and borrow agEUR to swap it to more FRAXBP.

In practice, she would have to deposit FRAX, USDC, CurveFRAXBP, StakeDAOFRAXBP or ConvexFRAXBP tokens in the protocol. Angle would then do the heavy lifting of depositing tokens in the best staking pools to maximize her rewards (2.5% in CRV and CVX for FRAXBP on Convex) and minimize costs.

With a x4 leverage and an initial $10,000 FRAXBP deposit, this process would borrow $30,000 of agEUR at a 0.5% interest rate (150 agEUR/y), and swap those to $30,000 of FRAXBP for a total of 40,000 earning 2.5% ($1,000/y).

If Euro is at parity with the Dollar, Alice’s profit after a year would be $850, or an 8.5% APR.

Alice would be able to claim the rewards from her collateral at any point in time.

Note that this system is not limited to Curve, Convex or StakeDAO tokens. Most tokens staked on a platform and earning token rewards could potentially be used as collateral (like the Aura token for the wstETH/wETH Balancer pool).

To be included, beyond a governance vote, tokens will still need to fit Angle’s risk framework which includes the following requirements:

• A robust oracle

• High liquidity for every token in the composability layers to be able to still efficiently liquidate

Enabling productive assets as collateral makes borrowing agEUR much more attractive. At the same time, it opens a range of new opportunities for staked assets that were previously confined inside contracts.

The first staked asset being assessed to be accepted as collateral for agEUR is FRAXBP.

More details can be found in the governance discussion here. Our framework will very soon be ready for launch, so in the meantime make sure to share your thoughts or concerns about this AIP!