ETH StrategyIntroducing the Perpetual Note
The ETH Strategy Perpetual Note (ESPN) is a new yield primitive that transforms Ethereum’s natural volatility into an onchain yield stream.
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Overview, Plan, and New Treasury Lending Product
ETH StrategyPerpetual Debt Evolution
Our vision, has and continues to be that ETH is the best investment of the generation and a giga long that cannot be liquidated is the generational trade. We’ve raised 12,273 ETH (~$50M USD) to date, the next phase was to raise the debt required. What our initial equity raise unlocks for all STRAT holders is a coordination game of long-term ETH bulls ‘pooling’ their ETH together to demand better debt terms from the market that are not available individually. This is protocolised and done 100%...
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ETH StrategyIntroducing the Perpetual Note
The ETH Strategy Perpetual Note (ESPN) is a new yield primitive that transforms Ethereum’s natural volatility into an onchain yield stream.
ETH StrategyPreSaylor Unlocks
Overview, Plan, and New Treasury Lending Product
ETH StrategyPerpetual Debt Evolution
Our vision, has and continues to be that ETH is the best investment of the generation and a giga long that cannot be liquidated is the generational trade. We’ve raised 12,273 ETH (~$50M USD) to date, the next phase was to raise the debt required. What our initial equity raise unlocks for all STRAT holders is a coordination game of long-term ETH bulls ‘pooling’ their ETH together to demand better debt terms from the market that are not available individually. This is protocolised and done 100%...
Subscribe to ETH Strategy
>100 subscribers
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Last week, ETH Strategy introduced the Perpetual Note (ESPN), designed to harvest ETH’s natural volatility. The first deposit tranche capped at $1M within hours, seeding ETH purchases and kicking off the covered call strategy on Derive.
This week marks the next step: staking incentives for ESPN liquidity providers (LPs). Rewards are powered by ETH Strategy underwriting ESPN with long-dated call options on treasury ETH. By pairing those with selling shorter-dated options, ESPN is able to generate yield well above standard covered call strategies and create a steady stream of incentives for LP stakers.
In the introductory post we outlined how premiums would be split. Now that the first option cycle has completed, we can use real numbers to illustrate how value flows through ESPN. (As always, past results are not indicative of future performance; full details can be verified on Ethereum and Derive Chain.)
Last week, ESPN raised $1M and bonded to ETH Strategy with a long-term strike price of $4,687 which allows covered calls to be sold at Derive’s $4,700 strike. This capital was used to purchase 223 ETH at an average price of $4,485. Of this, 10 ETH was transferred to the treasury in return for long-dated calls (increasing EPS for STRAT holders), while the remaining 213 ETH was used to sell the first cycle of covered calls.
Cycle Results:
Option Premiums: $13,000
Derive Fees: $280
Protocol Reserve Fee: $1,275
ESPN Remainder: $11,500
In other words, ESPN generated 1.15% of deposits in one week (equivalent to an annualized return of 60% APR). This is real yield received in USDS. Now that we have a clear view of the value captured by ESPN, let’s break down how premiums are allocated between different stakeholders in the system.
Recall that ESPN targets a 12% annual base rate. From the first cycle’s $11.5k remaining, around $2.3k is used to buy ETH and expand the asset base, increasing the number of options ESPN can sell in future cycles. That leaves $9.2k available for distribution to liquidity providers as staking incentives.
Incentives are distributed to stakers as LP tokens. To accomplish this, half of those incentives ($4.6k) are used to buy back ESPN on the open market, a direct benefit to all holders (even those not staking). The purchased ESPN is then paired with the remaining USDS ($4.6k) to create new LP tokens, which are finally distributed via the staking contract.
To stake ESPN, participants provide liquidity for the ESPN-USDS pair and then stake the resulting LP tokens.
Before walking through the process, let's review our design choices.
We selected Uniswap v3 to concentrate liquidity and provide deeper markets for ESPN. Because UniV3 positions are non-fungible, we partnered with Arrakis to wrap these positions into fungible ERC20 tokens using their vault standard. This enables standardized liquidity ranges for all participants and unlocks staking functionality.
Liquidity is provided at the 0.05% fee tier, balancing market depth with trading costs for a stable(ish) asset like ESPN. At launch, the vault will concentrate liquidity between $10 and $1,000 per ESPN, a 10x range in both directions around the initial $100 par value. ETH Strategy may adjust this range over time to ensure healthy liquidity as the market evolves.
Staking ESPN takes just a few steps within the ETH Strategy app.
Select the Stake tab
Begin in ESPN’s Stake section. Enter the amount of ESPN you’d like to use for liquidity provision. You’ll need an equal amount of USDS to pair with your ESPN. A link is provided to acquire USDS via CoW Swap, though any DEX can be used.
Token Approvals
Before providing liquidity, both ESPN and USDS must be approved for the Arrakis vault contract. All contracts are verified onchain, but as always “don’t trust, verify.”
Provide Liquidity
Once approvals are complete, the app will display the target liquidity supplied. After confirming, click Provide Liquidity. This step pairs your ESPN and USDS in the Arrakis vault.
Receive LP tokens and Stake
After providing liquidity, you’ll receive “Arrakis Vault V2 ESPN/USDS” tokens representing your position. These LP tokens can then be staked directly in the ESPN staking contract, which distributes weekly incentives to depositors.
Option premiums are generated weekly on Derive, typically when the sold options expire each Friday. Incentives for ESPN stakers will follow the same rhythm, with rewards distributed on a weekly cadence. Distribution schedule may evolve over time as we optimize liquidity conditions. Any changes will be communicated clearly in advance.
After staking launches today (Friday, September 12), participants have until early next week to provide and stake ESPN liquidity before the first round of incentives is distributed.
ESPN Staking completes the design of the Perpetual Note, transforming harvested volatility into compounding growth, price support, and weekly rewards for liquidity providers. With incentives now live, the flywheel between depositors, LPs, and STRAT holders begins to accelerate. Join us by staking ESPN and take part in the next phase of ETH Strategy.
Join the Telegram: https://t.me/ethstrat
Follow us on Twitter: https://x.com/eth_strategy
Turn notifications ON.
Last week, ETH Strategy introduced the Perpetual Note (ESPN), designed to harvest ETH’s natural volatility. The first deposit tranche capped at $1M within hours, seeding ETH purchases and kicking off the covered call strategy on Derive.
This week marks the next step: staking incentives for ESPN liquidity providers (LPs). Rewards are powered by ETH Strategy underwriting ESPN with long-dated call options on treasury ETH. By pairing those with selling shorter-dated options, ESPN is able to generate yield well above standard covered call strategies and create a steady stream of incentives for LP stakers.
In the introductory post we outlined how premiums would be split. Now that the first option cycle has completed, we can use real numbers to illustrate how value flows through ESPN. (As always, past results are not indicative of future performance; full details can be verified on Ethereum and Derive Chain.)
Last week, ESPN raised $1M and bonded to ETH Strategy with a long-term strike price of $4,687 which allows covered calls to be sold at Derive’s $4,700 strike. This capital was used to purchase 223 ETH at an average price of $4,485. Of this, 10 ETH was transferred to the treasury in return for long-dated calls (increasing EPS for STRAT holders), while the remaining 213 ETH was used to sell the first cycle of covered calls.
Cycle Results:
Option Premiums: $13,000
Derive Fees: $280
Protocol Reserve Fee: $1,275
ESPN Remainder: $11,500
In other words, ESPN generated 1.15% of deposits in one week (equivalent to an annualized return of 60% APR). This is real yield received in USDS. Now that we have a clear view of the value captured by ESPN, let’s break down how premiums are allocated between different stakeholders in the system.
Recall that ESPN targets a 12% annual base rate. From the first cycle’s $11.5k remaining, around $2.3k is used to buy ETH and expand the asset base, increasing the number of options ESPN can sell in future cycles. That leaves $9.2k available for distribution to liquidity providers as staking incentives.
Incentives are distributed to stakers as LP tokens. To accomplish this, half of those incentives ($4.6k) are used to buy back ESPN on the open market, a direct benefit to all holders (even those not staking). The purchased ESPN is then paired with the remaining USDS ($4.6k) to create new LP tokens, which are finally distributed via the staking contract.
To stake ESPN, participants provide liquidity for the ESPN-USDS pair and then stake the resulting LP tokens.
Before walking through the process, let's review our design choices.
We selected Uniswap v3 to concentrate liquidity and provide deeper markets for ESPN. Because UniV3 positions are non-fungible, we partnered with Arrakis to wrap these positions into fungible ERC20 tokens using their vault standard. This enables standardized liquidity ranges for all participants and unlocks staking functionality.
Liquidity is provided at the 0.05% fee tier, balancing market depth with trading costs for a stable(ish) asset like ESPN. At launch, the vault will concentrate liquidity between $10 and $1,000 per ESPN, a 10x range in both directions around the initial $100 par value. ETH Strategy may adjust this range over time to ensure healthy liquidity as the market evolves.
Staking ESPN takes just a few steps within the ETH Strategy app.
Select the Stake tab
Begin in ESPN’s Stake section. Enter the amount of ESPN you’d like to use for liquidity provision. You’ll need an equal amount of USDS to pair with your ESPN. A link is provided to acquire USDS via CoW Swap, though any DEX can be used.
Token Approvals
Before providing liquidity, both ESPN and USDS must be approved for the Arrakis vault contract. All contracts are verified onchain, but as always “don’t trust, verify.”
Provide Liquidity
Once approvals are complete, the app will display the target liquidity supplied. After confirming, click Provide Liquidity. This step pairs your ESPN and USDS in the Arrakis vault.
Receive LP tokens and Stake
After providing liquidity, you’ll receive “Arrakis Vault V2 ESPN/USDS” tokens representing your position. These LP tokens can then be staked directly in the ESPN staking contract, which distributes weekly incentives to depositors.
Option premiums are generated weekly on Derive, typically when the sold options expire each Friday. Incentives for ESPN stakers will follow the same rhythm, with rewards distributed on a weekly cadence. Distribution schedule may evolve over time as we optimize liquidity conditions. Any changes will be communicated clearly in advance.
After staking launches today (Friday, September 12), participants have until early next week to provide and stake ESPN liquidity before the first round of incentives is distributed.
ESPN Staking completes the design of the Perpetual Note, transforming harvested volatility into compounding growth, price support, and weekly rewards for liquidity providers. With incentives now live, the flywheel between depositors, LPs, and STRAT holders begins to accelerate. Join us by staking ESPN and take part in the next phase of ETH Strategy.
Join the Telegram: https://t.me/ethstrat
Follow us on Twitter: https://x.com/eth_strategy
Turn notifications ON.
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