Unpacking a High-Yield DeFi Strategy on SonicLabs

If you're looking to maximize your returns in decentralized finance (DeFi), a recent thread by The Smart Ape on X caught my eye. Posted on March 24, 2025, this thread outlines a strategy on SonicLabs that promises a whopping 55% annual percentage yield (APY) using stablecoins. It’s a stablecoin-only approach, meaning it avoids the volatility of other cryptocurrencies, and it also earns you additional perks like Sonic and Silo points. Let’s break it down in simple terms.

What Is SonicLabs?

First, a quick primer on SonicLabs. It’s a high-performance Ethereum Virtual Machine (EVM) Layer-1 blockchain designed for DeFi and Web3 applications. According to their official site, SonicLabs boasts an impressive 400,000 transactions per second (TPS) with instant finality, making it one of the fastest blockchains for digital assets. This speed and efficiency make it a great platform for yield farming strategies like the one we’re diving into.

The Strategy: Step-by-Step Breakdown

The Smart Ape’s strategy involves a series of steps across multiple DeFi protocols—Rings Protocol, Pendle Finance, and Silo Finance—to stack yields and amplify returns. Here’s how it works:

Step 1: Get USDC on SonicLabs

To start, you’ll need USDC, a popular stablecoin pegged to the US dollar. The thread suggests using bridges like RhinoFi, Stargate Finance, or deBridgeFinance to transfer USDC to the SonicLabs network. Bridges are tools that let you move assets between different blockchains, and these options are recommended for their reliability.

Step 2: Deposit on Rings Protocol

Next, head to Rings Protocol. Here’s what you do:

• Deposit USDC to receive scUSD, a synthetic version of USDC.
• Stake scUSD to get stkscUSD.
• Wrap stkscUSD into wstkscUSD.

This step alone earns you a 5.8% APY, which is a solid starting point. The process involves transforming your USDC into a yield-bearing asset that can be used in further steps.

Step 3: Earn Fixed Yield on Pendle Finance

Now, take your wstkscUSD to Pendle Finance, a platform that lets you tokenize and trade yields. Deposit your wstkscUSD to receive PT-wstkscUSD (Principal Token). At maturity—set for May 29, 2025—you’ll earn a fixed yield of 12% APY. Pendle splits yield-bearing assets into two parts: Principal Tokens (PT) for fixed yield and Yield Tokens (YT) for speculative yield, as explained on Silopedia. At this point, your total yield is 5.8% (from Rings) + 12% (from Pendle) = 17.8% APY.

Step 4: Borrow on Silo Finance and Loop

Head to Silo Finance and deposit your PT-wstkscUSD. Here, you’ll borrow more USDC while maintaining a health factor of around 10%, which translates to an 80% loan-to-value (LTV) ratio. LTV is the ratio of your borrowed amount to your collateral—80% means you’re borrowing 80% of your collateral’s value. Since you’re borrowing stablecoins (USDC) against stablecoin-backed assets, the risk of liquidation is low.

The borrowing cost, or annual percentage rate (APR), is 8.5%. Now, take the borrowed USDC and repeat the entire process—deposit on Rings, stake on Pendle, and deposit on Silo—up to 20 times. This “looping” amplifies your yield. After 20 loops, The Smart Ape calculates a total APY of 54.49%, rounded up to 55% in the post.

Step 5: Earn Additional Rewards

On top of the 55% APY, you’ll also earn Sonic points and Silo points. These are loyalty or reward points from the SonicLabs and Silo Finance ecosystems, often used to incentivize users and potentially redeemable for future benefits like airdrops or governance tokens.

The Pepe the Frog Meme: A Crypto Staple

The image in the tweet features Pepe the Frog, a well-known internet meme created by Matt Furie in 2005, as noted in a Kraken Blog post. In crypto culture, Pepe often appears in memes to express skepticism, irony, or humor. Here, the “thinking” Pepe likely reflects the complexity of the strategy or disbelief at the high APY—55% is a massive return for a stablecoin strategy!

Risks and Downsides

The Smart Ape highlights that this strategy is relatively low-risk since it uses stablecoins, minimizing exposure to price volatility. However, there are still some considerations:

• Smart Contract Risk: All DeFi protocols carry the risk of bugs or exploits in their code. Always research the protocols you’re using.
• Health Factor Monitoring: While liquidation risk is low, you should keep an eye on your health factor (a metric of your loan’s safety) and top up your borrow APY to avoid issues.
• Time-Intensive: Looping 10 times took The Smart Ape 20–30 minutes, so 20 loops could take nearly an hour. They note a desire for automation but haven’t found a protocol to streamline the process yet.

Why This Strategy Stands Out

This approach is a great example of how DeFi protocols can be combined to stack yields. By leveraging Rings Protocol for base yield, Pendle for fixed yield, and Silo for borrowing and looping, you can achieve returns far higher than traditional finance options. Plus, the use of stablecoins makes it accessible for those wary of crypto’s volatility. The added Sonic and Silo points are a cherry on top, potentially offering future value.

Final Thoughts

The Smart Ape’s thread is a goldmine for DeFi enthusiasts looking to maximize yields on SonicLabs. While the 55% APY is impressive, the strategy requires careful execution and an understanding of the protocols involved. If you’re new to DeFi, start small and do your own research—especially on smart contract risks. For more details, check out The Smart Ape’s Telegram channel for additional resources and updates.

What do you think of this strategy? Have you tried yield farming on SonicLabs? Let me know in the comments!