This month, I decided to conduct a DeFi experiment in which I invested ~$7000 into different DeFi products across the industry to track their progress over the coming months.
This experiment started on June 14, here are the results after 7 days.
Results after 1st week: full img size
What factors apply to the experiment:
- Token Price Appreciation
- Token Supply Changes (Only for Uniswap+AMPL column)
- Fees earned for LP/Lending/Staking
- Extras atop of fees, such as extra $COMP tokens as seen in (21 JULY REWARDS) row.
More details below.
A short intro for anyone who's new to DeFi:
DeFi, a.k.a. Decentralized Finance, is a sector in the blockchain space, mainly on Ethereum that allows users to borrow, lend, trade, insure, hedge cryptocurrency without the need to go through a middleman.
And that's just the tip of the iceberg of what programmable money can do.
The entire DeFi sector is extremely hot right now - especially since Compound Finance distributed its governance token $COMP - and, for this reason, I decided to conduct this experiment in which I will track the progress of returns after investing ~$1000 each into a handful of different DeFi platforms.
In this experiment, I decided to invest in 7 different DeFi platforms. In some of the investments, I am staking cryptocurrency to earn rewards. In others, I am providing liquidity to the liquidity pool and earning from any transfer fees. Additionally, in two of the investments, I lend out cryptocurrency.
First, a quick list of platforms I’m going to use (with more details below on how I’m using them):
- Uniswap V2
Firstly I hope that this experiment will help you guys to track the progress of the platforms that I have invested in. Second, and most importantly, I hope they can generate some sort of positive returns.
These platforms are listed in no particular order;
Compound Finance is a platform that allows users to either borrow or lend cryptocurrency. Users must pay an interest and deposit collateral if they wish to borrow any funds from Compound. At the same time, lenders can earn interest whenever they lend on their assets.
I've put $1027.50 into lending $DAI on Compound. $DAI is a decentralized stablecoin that maintains its peg to ~$1. When I deposited the tokens, the APY was around 2.21%. On top of all of this, I will also be earning the $COMP governance token as a little extra for lending my funds here.
Aave is an open-source protocol that enables the creation of money markets. Similar to Compound, Aave allows users to borrow or lend cryptocurrency directly on its platform.
I've put $1004 into Aave by depositing 411 SNX onto the platform to be used for lending. At the time of depositing, the APY was at around 3.25%. Once the SNX is deposited into Aave they are converted into aSNX.
3. Uniswap V2 + AMPL Geyser
Uniswap is an automated liquidity protocol that allows users to conduct fully decentralized autonomous swaps between ERC-20 tokens. In addition to this, users also have the option to provide liquidity to the Uniswap liquidity pools for regular traders to trade within. In doing so, liquidity providers earn from the funds generated from the trading fees on Uniswap.
I've put $1063.90 into the $AMPL-$ETH Uniswap pool. Ampleforth is one of the hottest projects in DeFi right now as it is completely different from any other project with its elastic money supply.
After depositing the liquidity into the $AMPL-$ETH pool, I deposited the Uniswap generated ERC-20 token into the Geyser.
It is an incentive program created by the Ampleforth to increase the depth of liquidity at Uniswap. On top of the fees earned from $AMPL-$ETH trades, I will also be earning the extra $AMPL from the Geyser.
Balancer is another automated market maker (AMM) protocol that allows users to easily swap between any ERC-20 token, just like on Uniswap. The key difference with Balancer, however, is the fact that Balancer allows users to create a pool of different tokens each with different weightings. This means that users can open a pool for ETH, USDC, and LINK with a 20/20/60 weighting split. Each time there is any price movement, this balance of the weighting is skewed and the Balancer platform will then swap the ERC-20 tokens to “rebalance” the portfolio again.
On the Balancer platform, I've put $1041 into the Jarvis ($JRT) - $ETH shared liquidity pool. I deposited the tokens with the required weighting that is set out by the shared pool owner which is 90% $JRT and 10% WETH.
Each time a user makes a swap on this pool I will be earning pool fees plus $BAL tokens as a protocol reward.
Curve.fi is pretty similar to Uniswap, however, it is mainly focused on providing a decentralized solution stablecoin swaps. Currently, the platform supports a variety of stablecoins including DAI, USDC, USDT, TUSD, and sUSD.
The reason that traders will use Curve.fi instead of Uniswap for stablecoin trading is the fact that Curve.fi trades the stablecoins directly against each other. On the other hand, Uniswap tends to swap one stablecoin for ETH and then swaps that ETH for another stablecoin which results in increased fees. As an example, this would mean that if you swapped 500 DAI on Uniswap you would only get around $490 USDC back. Whereas, on Curve.fi, when you swap DAI for USDC you are likely to get much closer to the true $500 amount.
On Curve, I provided $1010.20 worth of liquidity into the sUSD pool that is split amongst DAI, USDC, USDT, and sUSD. Each time a trade is made on this pool by another user, I will be earning SNX from any of the fees generated.
I will have to claim the SNX reward every week manually through the “Claim SNX” button on the “withdraw” page on Curve.fi.
Similar to Uniswap, Kyber is a platform that allows for the automated, decentralized, and instant ERC-20 based token swaps. Kyber differs from Uniswap, however, in the sense that it sources its liquidity from multiple sources when a user places a trade. If the cheapest place to trade is on Uniswap, then Kyber will conduct the trade through Uniswap and both platforms still benefit.
I invested $1016.40 into Kyber by buying 666 KNC and depositing them into Kyber.org for staking. Anyone can stake KNC on Kyber.org and claim the rewards from the platform each week. Staking KNC helps to secure the Kyber Network and also rewards users for doing so. In addition to this, staking KNC also grants rights for voting on the protocol’s future direction.
Bancor is a decentralized liquidity network that provides a platform to allow users to easily swap between tokens on the platform. The difference with Bancor is the fact that it is not tied down entirely to the Ethereum network. You can also conduct EOS token swaps on Bancor.
I provided $1002.90 worth of liquidity to the Bancor protocol through the 1inch.exchange platform. Split 50/50 into the BNT/ETH liquidity pool should be earning BNT as a reward for helping to facilitate swaps.
This is the first post of this series and I will update it on a weekly basis. Follow my blog and #$7kDeFiFarmer tag for more posts in this series.
Let me know if you have any tips or suggestions regarding the experiment!