I shared a popular tutorial on how to earn KCS without risks through DeFi projects on KCC. Recently, with the down-treading market environment, like everyone else, I am also interested in earning a safe and stable income. Therefore, I have found another arbitrage method that can be used on KCC to take advantage of KuCoin Earn.
Let me explain what KuCoin Earn is.KuCoin Earn is a wealth management service platform created by KuCoin that allows users to earn passive income, which often offers short-term or long-term activities with high APR. So, for long-term coin holders, how can they enjoy these earnings while holding their coins?
In the beginning, let me introduce the two projects and one platform used in the arbitrage formula. They are the NO.1 lending protocol based on KCC, Torches, the liquidity staking protocol for KCS on KCC, sKCS.io, and the financial service platform created by KuCoin, KuCoin Earn.
We will use three KuCoin Community Chain (KCC) Projects, Torches, and sKCS, to complete the arbitrage. So, please make sure you have a KCC wallet. If you haven’t set up your KCC wallet, you can see this tutorial to set up your KCC Wallet first.
Firstly, stake the held KCS on sKCS.io to earn APY and sKCS (the mechanism of sKCS.io is to stake KCS to get sKCS, so we can think of it as a KCS/sKCS trading pair). Then, deposit the sKCS into Torches to borrow other assets (KuCoin Earn currently supports over 50 assets), and purchase KuCoin Earn's financial products to earn passive income. The principle is to use the APY from sKCS.io to offset the APY of borrowing assets on Torches, achieving maximum profit.
Next, I will elaborate in detail.
How to Arbitrage
1. Staking KCS on sKCS.io to obtain a high APY is crucial.
The mechanism of sKCS.io is staking KCS to get sKCS, so we can consider it as a KCS/sKCS trading pair. We can use USDT as an example to create an arbitrage program, and the ultimate profit will be received in USDT. Taking the latest sKCS.io (2023-3-1) as an example, the APY is 3.44%.
Firstly, assuming a user stakes all the KCS worth 10,000 USDT on sKCS.io for a year and receives an equivalent amount of sKCS, the user's profit for the year will be 344 USDT (10,000*3.44%=344).
2. Depositing sKCS on Torches to borrow USDT.
Torches is a lending protocol based on KCC, which passed a security audit by PeckShield after its launch. It has received strategic investment from KuCoin Ventures and is deeply incubated by KCC. Currently, Torches supports mainstream cryptocurrencies such as BTC, ETH, KCS, USDT, USDC, etc.
Next, the user will deposit the sKCS obtained on sKCS.io into Torches to borrow USDT. According to the collateral factor (50%) of sKCS on Torches, the user can borrow up to 5000 USDT (10,000*50%=5000). However, considering the possible liquidation risk caused by market fluctuations, to protect personal assets, assuming the user can borrow USDT up to their hard cap of 60%, which is 3000 USDT (5000*60%=3000). According to the APY for borrowing USDT on the platform, which is 0.18%, assuming the user borrows for one year, he will pay 5.4 USDT in interest (3000*0.18%=5.4).
Of course, if you are concerned about liquidation due to a low collateral ratio on Torches, you can tap “My Assets”, and then you can see the real-time “Borrow Limit Used” on the dashboard. It highlights explicitly that if your borrowing is above the threshold will be at risk of liquidation.
3. Choose your preferred financial product on KuCoin Earn
KuCoin Earn offers various types of financial products, such as Savings, Staking, Flexible Staking Promotion & Fixed Staking Promotion, and others. As of the latest update on KuCoin Earn (2023-3-1), the highest APR in USDT's current product is Savings, which is as high as 4%.
Assuming the user deposits 3000 USDT into KuCoin Earn for one year, the profit obtained would be 120 USDT (3000*4%=120).
By using this arbitrage method, the profits obtained from depositing far exceed the interest paid from borrowing. Ultimately, the user's profit for the year would be 458.6 USDT (344+120-5.4=458.6).
Similarly, users can also directly borrow other assets by depositing BTC, and ETH into Torches, while participating in KuCoin Earn's financial products to earn passive income. The principle is that the collateral factors of BTC and ETH are higher than that of sKCS, allowing for borrowing more stable coins to purchase KuCoin Earn's financial products.
By the way, KCC, as KuCoin's exchange public chain, the number of independent addresses on the chain increased from 100,000 in mid-2022 to nearly 600,000 at year-end, with an increase of more than 500%. Even more impressively, it has successfully deployed over 100 projects, including DeFi, NFT, GameFi, Web3.0 Infrastructure, and other areas. As an old player in the cryptocurrency circle, I have a high opinion of this public chain project, as it always provides opportunities for arbitrage within the KCS ecosystem.
Alright, that's it for this arbitrage formula. KuSwap KMX (a leverage trading platform) has entered the testing phase, and I will share more arbitrage methods with you in the future. If you are also interested in arbitrage, feel free to share your thoughts in the comments.
Torches Official Website：https://www.torches.finance/en
Tutorial on how to borrow assets on Torches：https://docs.torches.finance/docs/guides/depositing
It is only for sharing opinions and does not constitute investment advice. Please avoid the risk of liquidation when using the Lending service.