Leverage-Yield Effective APR

How the SDK computes the headline APR for a leverage-yield vault — combining on-chain AAVE rates with the underlying LSD’s native staking yield.

TL;DR

A leverage-yield vault deposits an LSD (weETH, wstETH) into AAVE, borrows ETH against it, swaps the borrowed ETH back to the LSD, and re-deposits — looping to a multiple of the user’s principal. Yield comes from three places:

AAVE supply rate on the collateral leg (paid by other AAVE borrowers).
LSD staking yield baked into the token price (the LSD appreciates against ETH).
The above two amplified by leverage, minus the AAVE borrow rate paid on the borrow leg.

The SDK’s getApr() reads only AAVE rates and misses (2). getEffectiveApr() adds the LSD yield from DefiLlama and reports the honest number.

Formula

effectiveSupply = aaveSupply + lsdStaking
spread          = effectiveSupply − aaveBorrow
effectiveNet    = effectiveSupply + leverage × spread

leverage        = targetLTV / (1 − targetLTV)

All terms are APRs (annualised, in percent). targetLTV comes from the vault contract (targetLTV(), returned in basis points), aaveSupply / aaveBorrow come from the AAVE pool’s getReserveData(), and lsdStaking comes from DefiLlama (see LSD Source).

Derivation

The formula is the closed-form limit of the vault’s recursive supply→borrow→re-supply loop. Start with deposit X of LSD as collateral:

Step	Supplied	Borrowed
0	`X`	0
1	`X`	`LTV · X`
2	`X · (1 + LTV)`	`LTV · X · (1 + LTV)`
3	`X · (1 + LTV + LTV²)`	`LTV · X · (1 + LTV + LTV²)`
∞	`X · Σ LTVⁿ = X / (1 − LTV)`	`LTV · X / (1 − LTV) = X · leverage`

So in the steady state, per X of original deposit:

Total supplied = 1 / (1 − LTV) = 1 + leverage
Total borrowed = leverage

Earnings:

supply earnings = (1 + leverage) × supplyRate
borrow cost     = leverage × borrowRate

net = (1 + leverage) × supplyRate − leverage × borrowRate
    = supplyRate + leverage × (supplyRate − borrowRate)

That last line is the formula. The + supplyRate is your principal still earning yield; the leverage × spread is the amplified spread from the loop.

The LSD twist

For LSD-backed vaults, the collateral leg earns yield from two independent sources that compose linearly:

AAVE’s currentLiquidityRate for the LSD — depends on who else is borrowing it on AAVE. Often near zero for LSDs because they’re not heavily borrowed.
The LSD’s native staking yield — the LSD token (weETH, wstETH) appreciates against ETH at the issuer’s staking rate. This is off-chain yield as far as AAVE is concerned — it doesn’t show in currentLiquidityRate. It just accrues to the token-price.

So supplyRate → aaveSupply + lsdStaking. The formula stays identical, only the supply-side input changes:

effectiveNet = (aaveSupply + lsdStaking) + leverage × ((aaveSupply + lsdStaking) − aaveBorrow)

When the LSD’s staking yield is the dominant component (it usually is), ignoring it makes the headline APR look negative — even when the position is genuinely profitable.

LSD source: DefiLlama

The SDK fetches lsdStaking from DefiLlama’s per-pool chart endpoint:

GET https://yields.llama.fi/chart/<poolId>
→ { status: 'success', data: [{ timestamp, tvlUsd, apy, apyBase, apyReward, ... }, ...] }

apy is the compounded yield including reward tokens (what the depositor actually earns). The SDK takes data[data.length - 1].apy (latest entry) and folds it into the formula above. Each vault registers a DefiLlama poolId in @sodax/types:

Vault	LSD	DefiLlama project	poolId
`lsodaWEETH`	weETH	`ether.fi-stake`	`46bd2bdf-6d92-4066-b482-e885ee172264`
`lsodaWSTETH`	wstETH	`lido` (via stETH)	`747c1d2a-c668-4682-b9f9-296708a3dd90`

The endpoint is CORS-enabled (access-control-allow-origin: *) so a browser-side dApp can hit it directly — no backend required. If the live fetch fails, the SDK falls back to a hardcoded fallbackAprPct in the same registry entry and flags the response with stale: true so the UI can show the value as an estimate.

Worked example

A snapshot of the weETH vault at the moment of writing:

Term	Value	Source
`aaveSupply` (sodaWEETH)	0.00%	AAVE `getReserveData(asset).currentLiquidityRate`
`lsdStaking` (weETH)	2.92%	DefiLlama pool `46bd2bdf-…`, latest `apy`
`effectiveSupply`	0.00 + 2.92 = 2.92%	sum
`aaveBorrow` (sodaETH)	1.04%	AAVE `getReserveData(borrowToken).currentVariableBorrowRate`
`spread`	2.92 − 1.04 = 1.88%	difference
`targetLTV`	85.00%	vault contract `targetLTV()`
`leverage`	0.85 / 0.15 = 5.67×	derived
`leverage × spread`	5.67 × 1.88 = 10.66%	multiplication
`effectiveNet`	2.92 + 10.66 = 13.58%	final

For comparison, the AAVE-only number (what getApr() returns, ignoring the LSD’s staking yield) on the same vault is:

aaveOnlyNet = 0% + 5.67 × (0% − 1.04%) = −5.90%

The 19.5-percentage-point gap between effectiveNet and aaveOnlyNet is the whole reason these vaults exist: it’s the LSD’s staking yield multiplied by leverage.

Code references

Formula implementation: LeverageYieldService.getEffectiveApr (packages/sdk/src/leverageYield/LeverageYieldService.ts)
LSD fetcher: fetchDefillamaApr in the same file
AAVE-only calculation: LeverageYieldService.getApr (also same file)
Vault registry (with lsdSource.poolId): packages/types/src/leverageYield/leverageYield.ts

Caveats

Steady-state, not realised: this is the APR a position earns at targetLTV if rates stay constant. Realised APY depends on rebalance cadence, rate volatility, and how long the vault sits off-target.
lsdStaking is a moving average: DefiLlama publishes the trailing yield, typically a 7- to 30-day window. Spot yield can differ by a few bp.
Vault drift: if position.ltv < targetLTV, the actual position is under-leveraged and earns less than the headline number. Watch LeverageYieldService.getPosition() for the live LTV.
Negative spread case: if aaveBorrow > effectiveSupply, leverage amplifies the loss. The formula handles this correctly (effectiveNet goes negative) — it’s a real signal, not a bug.

Foundation

Connection

Experience

Leverage-Yield Effective APR

TL;DR

Formula

Derivation

The LSD twist

LSD source: DefiLlama

Worked example

Code references

Caveats

​TL;DR

​Formula

​Derivation

​The LSD twist

​LSD source: DefiLlama

​Worked example

​Code references

​Caveats

TL;DR

Formula

Derivation

The LSD twist

LSD source: DefiLlama

Worked example

Code references

Caveats