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This section provides the formal definitions and equations that govern Blend’s strategies, as detailed in the whitepaper.

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Yield Scoring

Expected gross APY per venue is adjusted by: incentive stability, liquidity depth, volatility, and borrow curve shape. The risk‑adjusted score equals gross yield minus risk premia minus execution costs.

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Cost Model

  • On‑chain gas (per chain) converted to base currency
  • Slippage estimate per path
  • Rebalance executes only if benefit − cost ≥ threshold

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Thresholds

  • Target bands per component (e.g., ±1–3% deviation)
  • Hysteresis to avoid oscillation
Exact parameters are curator/policy dependent and may change over time.

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Core Variables

VariableDefinition
AVault token (base asset)
PUser principal in A
CYield-bearing collateral asset
FFlash loan size in A
BAmount borrowed against C
qCUnits of C supplied as collateral

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Implicit Leverage

The effective leverage on strategy-allocated capital is derived from the Loan-to-Value (LTV) ratio: 
ℓ = F / (F - B) = 1 / (1 - LTV)
For an LTV of 80% (0.8), the implicit leverage ℓ is 5x.

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Delta Neutrality Condition

The position delta ∆ is the rate of change of the portfolio value with respect to the price of the base asset A (SA). 
Δ = ∂/∂SA(qC * SA - B * SA) = qC - B
A position is considered delta neutral when qC ≈ B and the collateral asset C is closely correlated to the base asset A.

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Net APR Model

The blended net APR is a weighted average of the base vault yield and the leveraged strategy yield. 
APRnet = x * rv + (1 - x) * ℓ * rl
VariableDefinition
xFraction of capital retained in vault
rvVault APR (base yield)
(1-x)Fraction of capital in strategy
rlStrategy spread APR (yield - borrow)
ℓEffective leverage on strategy portion