How does Meria's ETH lending service work ?
Meria's ETH Lending service is a risk-based service, not a return-based service. Thus, we do not seek to maintain a fixed return, but rather to maintain a consistent balance between exposure and risk. When you subscribe to Meria's ETH Lending service you instruct Meria to invest your crypto-assets according to the following components:
Component 1: Diversification of protocols, compounders and CeFi platforms< Currently, Meria offers an allocation to the following protocols, DeFi (decentralised finance) compounders and CeFi (centralised finance) platforms, in accordance with our terms and conditions:
DeFi protocols: AAVE, AAVE AMM, Compound, Curve
Compounders (DeFi) : Convex, StakeDAO
CeFi platforms: Binance, Nexo, Woorton
Meria will not place more than 40% of Crypto Assets on any one DeFi/compounder protocol in order to mitigate counterparty risk. In addition, exposure to CeFi platforms as a whole is limited to 40%.
Component 2: Diversification of Crypto-assets
The diversification of the counterparties used also implies a conversion of the subscription Crypto-asset into one or more of the following Crypto-assets:
In the case of the use of CeFi platforms, as the actual distribution of the deposited Crypto-asset is not communicated by the latter, we can only assume that this Crypto-asset is not converted by the platform in question.
Whether you subscribe in fiat or ETH (investment or deposit), your capital is spread over several of these Crypto-assets (note: diversification is not necessarily done over all Crypto-assets at all times).
Component 3: Maximum exposure to a Crypto-asset
The notion of maximum exposure to a Crypto-asset is a factor determined by projecting oneself into a scenario in which all the liquidity pools containing that Crypto-asset in question would be totally unbalanced as well as all the funds deposited on the CeFi platforms (whose actual distribution we do not know). This is the maximum possible exposure to each crypto-asset taking into account the distribution of protocols, compounders and CeFI platforms at the time of the calculation.
Let's take the following diversification:
20% of the funds invested in an ETH-stETH pool
20% on an ETH-sETH pool
30% on a pool containing only ETH
30% in ETH on a CeFi platform (whose asset diversification we do not know)
The assumed maximum exposure to each crypto-asset would be as follows