Why can Angle offer better Euro yields?

The Euro yield paid to people staking agEUR into stEUR is 3.8%. This yield is the same whether you provide 1€ or 1m€.

Most French banks offer a 3% yield to their depositors and the amounts eligible for these 3% are usually capped. Some fintechs (Revolut, Trading Republic) are able to offer savings yield as high as 4% to their clients. But none of these can provide Euro yields higher than 3.5% for amounts greater than 50k€.

Angle does not lose money through its savings protocol. How can it still then offer a Euro yield for its stakeholders higher than what is available elsewhere?

The answer is not in the increased risk linked to the products Angle is exposed to but to the unique nature of the system Angle has built.

For every agEUR in circulation, Angle generates a yield on the assets backing this agEUR. In general this yield comes from:

• specific assets held by the protocol (e.g tokenized securities - in many cases the same as those bought by all the fintechs offering savings solutions)

• interest rates paid by agEUR borrowers

On average, and because of its risk averse approach, Angle is generating a 2.2% of yield for every agEUR in circulation. The protocol could by the way be generating more if governance decided to increase the exposure of the protocol to tokenized securities. So technically the protocol could afford to pay 2.2% for every agEUR in circulation.

What is key to understand is that not all agEUR are in the protocol's savings solution. Angle is a decentralized stablecoin system, and there is in fact utility for agEUR out of the savings solution.

Some people are earning trading fees by providing agEUR liquidity for Forex traders in liquidity pools. Others are simply borrowing the stablecoin as a means to get leverage on various crypto assets.

There are also a wide range of arbitrageurs which are taking advantage of agEUR cross chain composability to arbitrage pools with other tokens that cannot be moved as easily from one chain to another.

A stablecoin is a building block that must be designed to keep a stable price with respect to a reference asset. Once this works, anyone can build its application on top of. A savings solution is one application among others.

As it stands, ~50% of all the agEUR in circulation are in Angle savings product.

If 50% of the agEUR are not in the savings product, this means that the protocol can afford to allocate to those who are in it the yield it is earning from the assets backing the agEUR that are not in the savings product. With this, technically the protocol could, and without operating at a loss, make the stEUR yield as high as 4.4%.

Participants in Angle savings solution are enjoying a multiplier effect: they are earning more by going into Angle solution with respect to what they would be earning if they were implementing the same strategies.

The APY of the stEUR product is 3.8% and not 4.4%. This is because the protocol allocates 90% of its yield earnings to stEUR holders. The rest serves as a way to increase the equity buffer of the protocol that is here to make the protocol more robust to black swans. So far, this equity is 7.1m€: Angle could afford to lose 7m€ and still have 1 EUR in the backing for every agEUR in circulation.

This amount is already relatively large with respect to the amount of agEUR in circulation.

The consequence of this is that the protocol does not need to earn a high margin to keep an important security buffer: it can therefore allocate more of its yield to its users.

Another important thing to note is that the protocol works autonomously with very limited operation costs. Like any good DeFi protocol, everything in Angle is automated and there is no need for humans to close positions on a day to day basis.

Consequence is that operational costs for Angle are very limited and therefore the protocol does not need funds on the side to bare for large expenses.The financial situation of the protocol as well as its operational setup enable it to allocate a higher share of its earnings to its users than what would be possible in a TradFi setting.

Because it's built on a blockchain infrastructure that offers composability, automation and lower operational costs for participants.

Higher yields do not necessarily mean that inconsiderate risks have to be taken to reach them.