Part II: Boosted Yields

Boosted Yields

The boosted element of Elemental Lend comes into play when our in-house strategies are expected to outperform the standard lending market. In such cases, Elemental can borrow funds from the lending pool at the prevailing Elemental Lend rate plus a borrow fee - effectively enhancing overall returns.

In the example below, without any borrowing activity, the prevailing Elemental Lend yield would stand at 7.8%. However, the borrowed funds deployed into Elemental Strategies pay the 7.8% base rate plus a 0.5% borrow fee, bringing their total cost to 8.3%.

This structure allows depositors to earn above-market returns, or as we call it here: boosted yields.

This mechanism enables Elemental Lend to not only match the highest yields, but to surpass them when market conditions permit.

Sole Deployment: Funding Rate Farming

At present, when funds are borrowed, it only gets deployed into our funding rate farming strategy. We have isolated this strategy because of the excellent risk-reward payoff, and have taken intentional steps to reduce risks where possible.

Risk Reduction I: Eliminate Cross-Platform Risk

We run our strategy exclusively on Drift, removing the cross-platform exposure that typically leads to liquidation risk. When collateral is split across venues, part of the position remains unhedged on the trading platform. In calm markets this is manageable; in stressed conditions, it becomes dangerous.

The real vulnerability appears during adverse events - API failures, blocked top-ups, network instability such as chain halts on DeFi platforms, or server outages on CeFi venues. These incidents often coincide with sharp price swings, precisely when additional collateral is required. This is why many “market-neutral” strategies are caught off-guard and liquidated despite appearing hedged. Details matter.

Drift’s multi-token collateral support allows us to keep every hedge perfect and continuous; 1:1 between perpetuals and the corresponding spot assets. Because all collateral and execution live on a single platform, there is no need for emergency transfers or top-ups, even under extreme stress.

This design protects against the most serious systemic risks: chain halts, platform disruptions, and violent price crashes. Few strategies can maintain integrity through such conditions. Elemental has done so for years, operating through the FTX collapse, the Wormhole exploit, and a prolonged bear market without loss of capital.

Risk Reduction II: Reduce Volatility

We focus exclusively on major L1 assets such as SOL, ETH, and BTC. These markets have deep liquidity, and a large and diverse participant bases. As a result, funding rates on majors tend to be far more stable than on smaller assets, where open interest is shallow and price action is easily distorted by a few large traders.

Stability also improves when exposure is diversified across several L1s. Each asset responds differently to market news. By mixing assets, we reduce the volatility of the aggregate strategy. Sudden funding spikes in one market may get offset by calmer conditions in another, creating smoother, more predictable performance.

This approach builds a more resilient portfolio: fewer swings in yield performance, and reduced sensitivity to idiosyncratic events. In short, diversification across major L1s enhances stability without compromising yield potential.