Sturdy is a decentralized finance (DeFi) protocol that facilitates isolated lending with shared liquidity. The platform is designed to allow users and project teams to create liquid money markets for any token while enabling lenders to control their risk exposure. ^[1]

Overview

Sturdy was developed to address a fundamental challenge in DeFi lending protocols: the trade-off between risk isolation and liquidity fragmentation. Traditional lending protocols often use a pooled risk model, where all assets in a pool serve as collateral for all debts, meaning a single high-risk asset can potentially endanger the entire protocol. Conversely, models that isolate risk by creating separate lending pools for each asset often suffer from fragmented liquidity, leading to lower capital efficiency and a poorer user experience. ^[1]

The protocol implements a two-tier architecture to mitigate this issue. The base layer consists of risk-isolated lending pools, referred to as "silos." Each silo contains a specific collateral asset and a debt asset. This structure ensures that the risks associated with one collateral type do not affect other pools. Built on top of this base layer is an aggregation system that allows lenders to deposit funds into aggregators. These aggregators then distribute the liquidity across multiple whitelisted silos, effectively sharing liquidity across isolated markets. This design aims to provide the deep liquidity characteristic of pooled models while maintaining the security benefits of risk isolation. ^[1]

For users, Sturdy offers distinct functionalities. Lenders can choose which specific collateral assets they are willing to be exposed to by selecting corresponding aggregators, giving them direct control over their risk profile. Borrowers can use any supported asset as collateral within its designated silo, and the platform's architecture supports permissionless asset onboarding. This allows project teams to create money markets for their native tokens without lengthy governance processes, aiming to establish liquidity and utility for new assets more quickly. ^[1]

Technology

Sturdy's technical framework is centered around its unique architecture and its integration with external optimization networks. The system is designed to autonomously manage liquidity and optimize yields for its users.

Two-Tier Architecture

The core of the protocol is its two-tiered structure:

• Base Layer (Silos): This foundational layer is composed of individual, isolated lending pools. Each silo is a self-contained market for a single collateral asset. This isolation prevents contagion risk, where the failure or price collapse of one asset could impact the solvency of unrelated assets within the protocol.
• Aggregation Layer: This layer sits on top of the silos and is responsible for managing liquidity from lenders. Lenders deposit assets into aggregators, which function as yield optimizers. These aggregators, built using technology similar to Yearn V3, allocate the deposited funds across a whitelist of approved silos. This allows liquidity to be shared across different isolated markets, preventing the fragmentation that typically occurs in isolated lending models. ^[1]

Yield Optimization with Bittensor

A key technological component of Sturdy is its integration with Bittensor, a decentralized machine learning network. Sturdy operates its own Bittensor subnet, which is used to autonomously optimize lending yields. In this system, Bittensor miners analyze market data and generate optimal allocation strategies for the funds held in the aggregators. The aggregators then use these AI-generated allocations to distribute liquidity across the various silos in a way that maximizes returns for lenders. This integration allows the protocol to adapt to changing market conditions and optimize capital efficiency without manual intervention. ^[1]

Tokenomics

The Sturdy protocol is governed by the Sturdy DAO (Decentralized Autonomous Organization), which uses the native $STRDY token for governance purposes.

$STRDY Token

$STRDY is the governance token that allows holders to participate in decisions regarding the protocol's future. It has a fixed total supply and was distributed among various stakeholders, including investors, contributors, and the community treasury.

• Token Name: Sturdy ($STRDY)
• Total Supply: 100,000,000 $STRDY
• Contract Address: 0xaeB3607eC434454ceB308f5Cd540875efb54309A

The token distribution is allocated as follows:

• Treasury: 60.5% (no vesting)
• Contributors: 19% (subject to a three-year vesting period with a one-year cliff)
• Investors: 19% (subject to a three-year vesting period with a one-year cliff)
• Airdrop: 1.5% (no vesting)

This allocation structure provides the DAO with a substantial treasury for future development and ecosystem growth while aligning the long-term interests of the team and investors through vesting schedules. ^[2]

Use Cases

The Sturdy protocol is designed to serve several key participants within the DeFi ecosystem, each with specific benefits.

• For Lenders: The platform provides enhanced risk management tools. Lenders are not required to accept exposure to all collateral types within the protocol. Instead, they can select specific aggregators that are whitelisted for collateral assets they deem acceptable, allowing for a more granular and self-directed approach to managing risk.
• For Borrowers: Sturdy's architecture supports permissionless asset onboarding. This enables borrowers to use a wider variety of digital assets as collateral to borrow against, including long-tail assets that may not be supported by larger, more restrictive lending protocols.
• For Project Teams: The protocol offers a streamlined path for creating liquidity for new tokens. Teams can establish a dedicated money market for their token in a permissionless manner, which can help increase the token's utility and market depth without the delays associated with traditional governance proposals on other platforms. ^[1]

Security

The security of the Sturdy protocol is maintained through multiple external audits and a public bug bounty program. The smart contracts have been audited by several reputable firms in the blockchain security space to identify and rectify potential vulnerabilities.

The protocol has undergone security audits by:

• Spearbit
• ChainSecurity
• Zellic

In addition to these audits, Sturdy runs an active bug bounty program through the Immunefi platform. This program incentivizes white-hat hackers and security researchers to discover and responsibly disclose potential security flaws in the protocol's codebase in exchange for financial rewards. ^[1]

Investors

Sturdy has received backing from several prominent venture capital firms and investment groups within the technology and cryptocurrency sectors. The investors listed by the project include Pantera, Y Combinator, SoftBank, OneBlock Capital, KuCoin Ventures, and OrangeDAO. ^[1]