I have previously written about how YFV (now VALUE) managed to pull over $140M in liquidity from Balancer overnight - you can read that post here.
Now, it seems that the Liquidity Wars are continuing.
On average, every two weeks, there seems to be a brand new shiny thing in DeFi with better economics, incentives etc. This pattern is an observable cycle, and it seems not to be slowing down any time soon.
Because of the open-source nature, it is kind of unavoidable that forks will continue to pop-up every few weeks.
Let me remind you of some of the patterns that we have seen so far;
The Yearn Finance Forks:
YFI > YFII >> YFV >>> YFIII
Evolution of AMMs:
Uniswap > Sushiswap >> Kimchi
The Elastic Monetary Supply Coins:
AMPL > YAM >> BASED >>> OUSD
What's the Money Trend Right Now?
The overarching question is, where is this pattern heading next?
Where is the money being poured into right now?
I have identified two potential candidates that are already alive and kicking. These two protocols seem to be the newest players in the Liquidity Wars and are getting off to a great start.
Harvest Finance is one of the latest DeFi Protocols on the crypto block. This protocol automatically farms the highest yielding DeFi protocol and optimizes the yields using the latest farming techniques. It could potentially be described as an autonomous hedge fund with $FARM being the cashflow token for the protocol.
It currently has ~$1B in deposits.
Farming the highest yielding DeFi protocol was a manual process, making it extremely cumbersome to keep up-to-date with the latest DeFi trends. In the same fashion that Yearn Finance made it easier to aggregate yield from lending platforms (comp/aave/curve), Harvest Finance makes it easier to farm the highest yield across even a wider net of protocols.
On top of this, the constant switching between farming protocol led to increasing GAS costs, which needed to be paid each time a switch was made. By combining pool funds, the GAS costs are split amongst all holders, which effectively reduces the costs. This is also a concept that has been taken from Yearn Finance.
Holders of $FARM can receive cashflow revenues on Assets Under Management when depositing $FARM into the “Profit Sharing” pool, which is currently set at 30%.
The protocol was launched in early September 2020 by a group of anonymous developers, which is very common in the DeFi industry. Fortunately, Harvest Finance’s smart contracts, which were built from scratch, have been audited, and hopefully, there shouldn’t be any critical bugs to find down the line. Haechi Audit and PeckShield conducted the audits.
To find out more about Harvest Finance, I would suggest looking at their Wiki page, which has a great wealth of information.
Why Harvest Finance attracts so much liquidity?
- Harvest Finance offers the best APY available on the market. Right now, Harvest Finance offers some of the best APY yields today. For example, you can earn a yield of around 322% APY in the “Profit Sharing” pool on the protocol by just depositing FARM. Furthermore, you can make about 850% APY on the Uniswap FARM/USDC pool. In comparison, the highest current APY on VALUE sits at about 121% APY in the WETH/VALUE pool.
- Harvest Finance has a clearer interface dashboard to allow for more straightforward navigation. The platform is clean and intuitive, so you know exactly where to go and what to farm - you can see this in the introduction’s screenshot. Simple and clean.
- So far, there has been no drama in the Harvest Finance ecosystem. Everything seems to be running smoothly with a little-to-no debate about the protocol. In comparison, other projects such as DeFi Value has already had a tonne of drama. For example, they have already conducted a migration from YFV to VALUE, which has caused some confusion, and it also involves a market cap dilution.
- As a cherry on the top, HARVEST establishes its brand by playing a good PR game - example
BarnBridge is the first yield fluctuation derivative protocol that was launched on October 14th, 2020. Just 5-days after launching, it managed to gather over $100 million in deposits through USDC, DAI, and sUSD. Upon the start of the first epoch dated on October 19th, it had around $130M in TVL. Today, 21 of October, it has crossed the $200M mark.
At first glance, it is quite a difficult concept to grasp for the average DeFi user.
In essence, it is a cross-platform derivatives protocol for any type of fluctuations, which is first focusing on yield sensitivity and market price.
What does this even mean?
Well, they plan to reduce the risk of digital asset yield sensitivity by dividing them into dollar-denominated tranches and then building derivatives off of these tranches - remember tranches from the 2007 Mortgage collapse?
It is basically creating a method for interest rate volatility risk mitigation using debt-based derivatives in Smart Yield Bonds.
Let me try and explain this a little better.
You know them APY yields you get while farming on DeFi? You might have noticed that they fluctuate quite wildly. One day they might be extremely high, but then the next day they drop quite dramatically. Nobody can harvest a decent yield when the APY fluctuates so dramatically.
Through $BOND, BarnBridge aims to allow DeFi users to get access to a fixed yield as well as smoothing out the yield curve across the entire industry. This will help mitigate risk and allow DeFi farmers to either have a fixed yield by pooling yields across the entire industry.
This project's birth story is actually quite fascinating and was described well in detail by Kain Warwick, the founder of Synthetix. In a Tweet thread, Kain basically describes how he initially received an unsolicited email about the idea for BarnBrdige. Although he had no time to help develop this product, he stated that he had no problem helping fund the project.
Why BarnBridge attracts so much liquidity?
- BarnBridge is the latest DeFi product that is gathering a lot of hype due to its unique concept. DeFi farmers are tired of the latest forks that offer little-to-no differences. BarnBridge is a new concept, and it seems that farmers are taking kindly to this.
- The team behind BarnBridge has already proven itself to DeFi fathers, such as Kain Warwick (Synthetix Protocol founder). On top of this, other grandmasters in DeFi seem to all agree with Kain as Santi Kulechov, Aave Founder, is also on board as one of the initial investors.
- Their token is called $BOND, which has given rise to an infinite volume of James Bond memes helping to spread the word about this brand new protocol.
- BarnBridge has a cheeky method with their epochs that causes people to pretty much FOMO in. That helped a lot especially amid launch of the very first epoch. Basically, each epoch lasts a week, and there is a countdown until the next epoch starts. During this time, users can deposit into the pools, and they will receive rewards proportional to the time they are staked. However, the funds need to stay staked until the timer runs down, and the epoch ends for users to be able to harvest their rewards.