Brother Lyskey 🥷@Lyskey
This is insanely bullish for Extended and Starknet DeFi.
Basically:
> You deposit USDC into the Extended vault, which runs advanced market making strategies and earns fees (~14% all-time APR for LPs).
> In return, you receive XVS, a tokenized share of the vault.
> Now Extended lets you use XVS as collateral to trade perps.
So you’re earning yield while trading and holding your perp positions. That’s a huge unlock for capital efficiency. Especially since Perp users have limited capital and must choose: either LP in the vault to earn passive yield, or keep USDC on the exchange to trade perps.
Right now there’s around 100M of USDC on Extended:
> ~$50M in the vault, providing perp liquidity via MM strategies
> ~$50M on the exchange, used to trade or just sitting idle
By letting users LP and use the same LP position to trade, there’s no trade-off anymore. You can LP and trade with the same capital. I expect a big portion of the 50M idle/trading USDC to migrate into the vault, which means deeper liquidity and better execution for everyone. On top of that, traders from other perps will likely be attracted by this setup.
That’s where the flywheel starts:
> More capital efficiency → more liquidity in the vault
> More liquidity → better pricing for traders
> Better pricing → more traders
> More traders → better APR for LPs → more liquidity
Spin this a few times and you get a monster.
On top, delta-neutral farmers will print even harder with this design, so they’ll probably deploy even more size into Extended strategies, adding even more liquidity and efficiency. This also unlocks wild structures on top of Extended, like an 'Ethena 2.0' built around XVS collateral for delta-neutral strategies.
Now imagine when XVS gets integrated across Starknet DeFi 🤯
So, so bullish.
