I will show you how to use KyberSwap to invest in ETH-sETH Liquidity pair and earn 20% APR with very low risks.
What is KyberSwap?
KyberSwap is an automated market maker (AMM), KyberSwap Elastic enables greater capital efficiency by allowing users to provide liquidity to a pool within a custom price range. It borrowed Uniswap V3 custom concentrated liquidity. This also means that liquidity contributed by an LP is no longer equally distributed across the same range as other LPs.
KyberSwap Elastic innovative liquidity mining (aka farming) mechanisms that are able to distribute farming rewards to users according to multiple factors:
1) Active time of liquidity (Dynamic Farms)
2) Supported trade volume (Dynamic Farms)
3) Liquidity contributed to operator-specified farm ranges (Static Farms)
Static Farms introduces the following benefits:
1) Operator (i.e. reward admin) configured farming ranges with weighted rewards distribution
2) Farming rewards for inactive ranges depending on operator defined farm ranges
3) Simpler user farming journey where any user can provide liquidity to any pair and liquidity provider fees and possible rewards.
All farms were setup based on 2 types of farming mechanisms:
1) Dynamic Farms Type 1 - Active time of your liquidity
This type of Farm relies on a single factor:
Total time your liquidity position has been active (aka in range) in the pool and supporting the current price of the pool
2) Dynamic Farms Type 2 - Active time of your liquidity & target volume
This type of Farm relies on an additional factor as compared to Type 1:
Total time your liquidity position has been active (aka in range) in the pool and supporting the current price of the pool
Trade volume supported by your liquidity position (indicated by the target Fee earned from the pool). The objective of Target Trade Volume is for the project that is giving out farming incentives to indicate the trading volume they would like each liquidity position to support before they receive farming rewards.
Remember, in order to earn rewards your LP pair needs to be in-range of current trading pairs.
Kyberswap supports Ethereum, BNB, Polygon, Avalaunche, Arbitrium, Optimism, Solana, Fantom, Cronos, Velas, Aurora, zkSync Era, Velas, and BitTorrent.
Finding Great Liquidity Pairs in Kyberswap
Kyberswap supports Ethereum, BNB, Polygon, Avalauch, Arbitrium, Optimism, Solana, Fantom, Cronos, Velas, Aurora, zkSync Era, Velas, and BitTorrent. Connect your Metamask wallet. One of the greatest LPs I found was tBTC-WETH at 47% APR on Polygon chain where you get 43% APR on farm rewards and 4% APR Pool rewards. If you want to bridge tokens, I would use xy.finance or celer Bridge to bridge your tokens. I will provide details videos on using XY Finance and Celer Bridges. Remember with any kind of high farm rewards, they are only temporarily provided by the Kyberswap Protocol. It goes away and you have to withdraw tokens when APR is not greater than 10%. I will not generally not even consider pools with APR less than 10%.
Providing Liquidity to Kyberswap ETH-sETH Pool on Optimism
I notice for few weeks the ETH-sETH LP is providing APR of 20%. There is $487,000 TVL on this pair. I decided to invest in this pool because both tokens are Ethereum. sETH is synthetic Ethereum that is trading at 1 ETH=1.0038 sETH. Find the ETH-sETH with fee 0.01%. Since both tokens are Ethereum based I can take some risks because there is very little chance of Impermance loss. I click on Expert mode where you provide concentrated liquidity. Click Half button on the ETH side. This tell you how much sETH you need for the current Expert concentrated liquidity mode you need. Open another tab and swap little over half of my Ethereum in to sETH. Approve sETH with Optimism gas fees. I like it lot better than Arbitrium because of very low gas fees. In terms of gas fees, my favorite chain is Fantom. Swap little more than half of ETH into sETH. Make sure you have few dollars of ETH left for gas fees. I wish Kyberswap have automatic single asset deposit option but they do not as of shooting this video, so I have to manually swap assets to meet the ratio of each assets. You can adjust the concentrated liquidity range if you want to tight the range or expand it. Buy expanding the range your liquidity fees will be reduced while more likly you will stay in the price range. Now go back to the tab with liquidity. Click Max sETH and automatically select the needed ETH tokens. Approve ETH with gas fees. Then approve sETH with gas. They click preview. Under Earn go to My Pools. You will see both my Velo-USDC and ETH-sETH pools I have created. I have invest $200 on ETH-sETH pool. If you want to remove liquidity click Remove Liquidity button and select how much you want to remove. Make sure to have the toggle button "claim your fees earned" toggle button before removing liquidity to earn rewards.
KyberSwap Dynamic Farms to Earn Farm Rewards
Deposit your liquidity from the Elastic Pools here, and then stake it to earn even more attractive farming rewards. Click on Earn drop down. Click on Farms. Farms are best way to earn majority of rewards. In my ETH-sETH LP out of total 20% APR, 19% APR is earned as farm rewards. I earn farm rewards in KNC tokens which is the native Kyberswap token and Optimisim OP tokens. General rule of tumb is never to keep any Protocol tokens due to large number of tokens generated with higher inflation of tokens that will depress the KNC Kyberswap native token price. I would every few weeks connect my rewards and sell into ETH or WBTC.
Risk and Rewards on Kyberswap
As I said earlier never to keep Protocol reward tokens like KNC to too long. Sell it into Stable coins USDC or large caps like ETH or BTC. There is allways risk of using pegged tokens like sETH or tBTC tokens because they could be depegged. You can reduce your risk by farming on more stable tokens like WBTC or WETH. There could always be a smartcontract exploit on Kyberswap that will steal all of funds by hackers.
In Summary
I discussed the potential returns on ETH-sETH 20% APR, on Optimism an Ethereum Layer 2 scaling solution built on Ethereum. I am investing on nearly no impermance loss token pairs. According to DefiSafety.com, Kyberswap safety score is 56%. Also Defisafety score is only assigned to Ethereum chain not on other side chains like Optimism. That is low compare to Uniswap that has a safety score of 96%. There is considerable risk involved. According to Defillama the Total Value Lock is 53 million dollars. It is a trusted dex interms of funds invested.
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