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Blend Protocol — USDC Leverage Loop Simulation

Simulates the maximum leverage achievable by looping USDC supply/borrow on the Blend Protocol Etherfuse pool on Stellar mainnet, using a live mainnet fork via soroban-ledger-snapshot-source-tx.

Strategy

Supply USDC as collateral
       ↓
Borrow USDC (up to c_factor × collateral)
       ↓
Re-supply borrowed USDC
       ↓
Repeat until position reaches theoretical maximum

Pool: CDMAVJPFXPADND3YRL4BSM3AKZWCTFMX27GLLXCML3PD62HEQS5FPVAI

Math

With collateral factor c = 0.95:

After n loops Formula
Total supplied initial × (1 − cⁿ⁺¹) / (1 − c)
Total borrowed total_supplied − initial
Leverage total_supplied / initial
Health factor (total_supplied × c) / total_borrowed
Net APY on initial (supply_rate × supplied − borrow_rate × borrowed) / initial

Maximum leverage (n → ∞):

leverage_max = 1 / (1 − c) = 1 / (1 − 0.95) = 20×

Liquidation Risk

Since both collateral and borrowed asset are USDC, the health factor is:

HF = (supplied × c) / borrowed

This is independent of USDC price — the oracle always prices USDC/USDC = 1.0. There is no traditional price-based liquidation risk.

Remaining risks at high leverage:

  • Rate risk: if borrow APR rises above supply APR, the position bleeds
  • HF at 20×: approaches 1.0000 — any interest accrual imbalance could trigger liquidation
  • Smart contract / pool solvency risk

Recommended safe maximum: ~13–15 loops to maintain HF ≥ 1.05.

How It Works

The simulation uses soroban-ledger-snapshot-source-tx to fork Stellar mainnet state at a specific ledger, then:

  1. Connects to the Etherfuse pool contract via blend-contract-sdk
  2. Reads all pool reserves via pool.get_reserve_list()
  3. Identifies USDC by token symbol
  4. Reads USDC reserve config: collateral factor, IR curve params
  5. Computes current supply/borrow APR from the Blend v2 kinked interest rate model
  6. Iterates the loop strategy for n = 0..∞ and prints the full table

Interest Rate Model

Blend v2 uses a three-kink kinked rate curve:

if util ≤ util_target:
    borrow_rate = r_base + r_one × (util / util_target)
elif util ≤ max_util:
    borrow_rate = r_base + r_one + r_two × (util − util_target) / (max_util − util_target)
else:
    borrow_rate = r_base + r_one + r_two + r_three × (util − max_util) / (1 − max_util)

borrow_rate  ×= ir_mod
supply_rate   = borrow_rate × utilization × (1 − backstop_take_rate)

Running

cargo test simulate_usdc_leverage -- --nocapture

The first run fetches ledger entries from Stellar mainnet RPC and caches them locally. Subsequent runs use the cache and complete in seconds.

Dependencies

Crate Source Purpose
soroban-ledger-snapshot-source-tx git (snapshot-source-tx branch) Mainnet fork
soroban-sdk crates.io v25 Soroban test environment
blend-contract-sdk crates.io v2.25.0 Blend pool contract client