LST Loop Strategy

The LST Loop is the Alpha Layer of the SOL Vault. It uses leveraged staking through Liquid Staking Tokens to amplify staking yield.

Mechanism

Step-by-Step

  1. Stake SOL with Dawn Labs' validator → receive dawnSOL

  2. Deposit dawnSOL as collateral on Kamino Lend (eMode)

  3. Borrow SOL against the dawnSOL collateral

  4. Restake borrowed SOL → more dawnSOL

  5. Repeat to desired leverage level

  6. Net yield = (Staking yield × leverage) − Borrow cost

Two Implementation Paths

dawnSOL × Kamino
Jupiter Native Stake

How it works

Flash loan → swap → deposit → borrow → repay loop

Direct validator stake used as collateral

Oracle Type

Pyth Push Feed (market price-based)

Theoretical price (stake rate-based)

Max Leverage

~10x via eMode

Varies by protocol

LTV / Liquidation

87% / 88% (1% buffer)

Wider buffer

Liquidation Mechanism

Slot-level partial liquidation (0.1% min penalty)

Standard

Setup Cost

Flash loan fee 0.001%/use + swap slippage

Lower

Best For

Higher yield potential, experienced operators

Lower risk, simpler management

When It Activates

LST Loop is a long-duration strategy — positions are held for weeks to months. Frequent entry/exit incurs swap costs that erode returns.

Condition
Staking
LST Loop
Trigger

Spread Wide

30–50%

50–70%

LST yield − SOL borrow rate > 3% for 1 week

Spread Narrow

80–90%

10–20%

Monitor, maintain existing positions

Negative Spread

100%

0%

Spread < 0% for 2 weeks → gradual unwind

Risks

Risk
Level
Details

Rate Reversal

Medium

SOL borrow rate exceeding staking yield creates negative carry

Liquidation

Medium–High

Tight LTV buffers (especially Kamino at 1%) require careful monitoring

LST Depeg

Low–Medium

Market price deviating from theoretical stake rate

Smart Contract

Low–Medium

Dependency on lending protocol security

Swap Cost

Low

Accumulated costs from frequent loop adjustments

Key Difference from Delta-Neutral

Delta-Neutral (USDC Vault)
LST Loop (SOL Vault)

Market Exposure

Zero (hedged)

Long SOL (amplified)

Yield Source

Funding rates + staking

Leveraged staking yield

Rebalancing

Daily–Weekly

Monthly

Suitable Market

High funding rate environment

Wide staking–borrow spread

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