Sturdy Finance is a decentralized DeFi lending protocol on Ethereum and Fantom that pioneered a yield-as-collateral lending model — where borrowers deposit yield-bearing collateral (stETH, yvUSDC, or Curve LP tokens) that is automatically deployed into underlying yield protocols (Lido, Yearn, Curve) during the loan period, with the generated yield distributed to the protocol’s lenders as interest, effectively subsidizing lender returns through borrower collateral productivity rather than requiring interest payments from the borrowers themselves — before suffering a $777,000 hack in June 2023 via Balancer read-only reentrancy, winding down, and relaunching as Sturdy V2 (an isolated lending model similar to Morpho Blue).
How It Works
- Yield-bearing collateral — Borrowers deposit liquid staking tokens (stETH), Yearn vault tokens (yvUSDC), or Curve LP tokens as collateral rather than raw ETH or USDC.
- Automatic yield deployment — During the loan period, Sturdy automatically deposits the collateral into the appropriate underlying yield protocol. stETH stays in Lido (earning staking yield); Curve LP tokens stay staked in Curve gauges; etc.
- Yield-to-lenders model — The yield earned by the collateral is directed to Sturdy’s lenders (those supplying USDC, DAI, or ETH to borrow against). This allows lenders to earn yield without borrowers directly paying interest — the collateral’s inherent yield subsidizes lender returns.
- Zero-interest borrowing — In periods where collateral yield is sufficiently high, borrowers can borrow major stablecoins at near-zero direct interest cost (their collateral is earning yield for them, effectively paying their interest).
Tokenomics
| Parameter | Value |
|---|---|
| Governance token | None (no live token as of 2024) |
| Revenue model | Protocol fee from collateral yield |
| Chains | Ethereum (primary), Fantom |
History
- 2022-Q2 — Sturdy Finance launches on Ethereum mainnet. The yield-as-collateral model attracts attention as a genuinely novel lending mechanic.
- 2022 — Sturdy expands to Fantom. TVL grows modestly. The protocol is audited by OpenZeppelin.
- 2023-06-12 — Sturdy Finance suffers a $777,000 exploit. The attacker exploits a read-only reentrancy vulnerability in Balancer’s weighted pool price oracle, manipulating the reported price of Balancer LP tokens used as collateral. Sturdy pauses contracts and investigates.
- 2023-Q3 — Sturdy evaluates its architecture and begins developing Sturdy V2, pivoting to an isolated lending pool model (similar to Morpho Blue) rather than the shared yield-as-collateral approach, addressing the oracle manipulation attack surface.
Common Misconceptions
“Sturdy’s yield model eliminates borrower interest entirely.”
Sturdy reduces or eliminates direct interest payment by routing collateral yield to lenders. However, borrowers pay an opportunity cost: the yield their collateral could have earned if kept independently. In periods of low collateral yield (bear market, low staking returns), lender yield also decreases.
Last updated: 2026-04