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Wrapped OETH (wOETH) is a liquid staking token designed to maximize your Ethereum staking rewards.
By using decentralized platforms like Euler, you can take your earnings even further by leveraging your wOETH to borrow more assets and compound your yield. This strategy, known as "looping," allows you to earn higher returns on your initial position. In this guide, we’ll explain how to use wOETH on Euler to boost your ETH yields.
Euler is a decentralized lending platform that allows users to deposit crypto assets, borrow against them, and earn yield. With wOETH, you can use Euler to multiply your staking rewards by borrowing and reinvesting assets, effectively leveraging your position.
The first step is acquiring Wrapped OETH (wOETH).
If you already hold OETH, you can convert it to wOETH using the Origin Dapp. Simply visit the platform, connect your wallet, and swap your OETH for wOETH.
If you don’t have OETH yet, you can acquire it here on the Origin Protocol platform using ETH. Alternatively, you can swap for OETH on a DEX like Curve. It’s important to note that Wrapped OETH accrues staking rewards directly to its price, rather than increasing in balance. This means that 1 wOETH is worth more than 1 OETH, so you will get less wOETH tokens than OETH due to its higher value.
Once you have your wOETH, the next step is to deposit it on Euler. Start by visiting the Euler platform and connecting your crypto wallet:
Navigate to the wOETH deposit section, choose the amount of wOETH you want to deposit, and approve the transaction. After depositing, your wOETH will begin earning yield from incentives on Euler, and you can now borrow against your position.
With your wOETH deposited, you can borrow against it. Euler allows users to borrow assets like ETH, USDC, and other stablecoins using their wOETH as collateral.
You can do this manually by selecting the borrow option, choosing wOETH as collateral, and specifying the asset and amount you wish to borrow:
Alternatively, platforms like Contango can automate the process, making it easier to manage your leverage. Instead of manually borrowing funds, Contango lets you choose your leverage and it creates your looped position in one click.
While looping wOETH can significantly increase your returns, it also comes with risks. Leveraging your assets can expose you to liquidation if the value of your collateral drops below the required threshold. However, this risk is mitigated by borrowing ETH, as wOETH increases in value relative to ETH, so liquidation risks are significantly reduced.
Additionally, price volatility in the crypto market can lead to sudden changes in the value of your borrowed assets, making it crucial to monitor your position closely.
However, these risks can be mitigated by carefully managing your loan-to-value (LTV) ratio and staying within a safe borrowing limit. Additionally, the deep liquidity of wOETH helps ensure a tight peg to ETH, reducing the risk of liquidation.
Always consider the potential risks before using a leveraged yield strategy, and only invest what you can afford to lose. By following these steps and managing your risk, you can use Euler to maximize your returns on wOETH and take full advantage of the opportunities DeFi has to offer.
