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How Yield is Generated for zheTOKENS

Zhenglong's high yields come from concentrating all the yield from the protocol's collateral into a smaller pool of active users.

  • Yield Concentration: When you mint zheTOKENS (pegged tokens) and steamedTOKENS (leveraged tokens), your collateral is pooled. However, only zheTOKENS deposited in the rebalance pool earn yield.

  • Example: Suppose there is $100 of collateral backing $50 of zheUSD and $50 of steamedETH.
    If only $30 of zheUSD is deposited in the rebalance pool (and the rest is in wallets or liquidity pools), then that $30 is earning yield from the full $100 of collateral.
    This means the rebalance pool can earn 3x the base yield—so if the collateral earns 7% APR, the rebalance pool could see 20%+ APR.

  • Result:

    • zheTOKENS in the rebalance pool earn a much higher APR than the underlying collateral.
    • steamedTOKENS benefit from the protocol's rebalancing and risk management, but do not earn yield directly.

  • Extra Boost: On top of this, $STEAM incentives can further increase the yield for active participants.

By concentrating all the yield from the protocol's collateral into the rebalance pool, Zhenglong delivers much higher APRs to active users than would be possible with the collateral alone.