Defi Yield Aggregators - last updated Sept 2/2020.

Defi Yield Aggregators - last updated Sept 2/2020.

By fblauer | Yield Hacking with Defi | 6 Aug 2020


Introduction

There are many good ways to pool your assets with other investors, and make more effective use of gas fees. Because of the way Eth network fees are structured, it is more efficient to be able to make small numbers of large transactions than numerous small ones. And experimentation is costly.This can easily eat up a big chunk of your profit if you don't find a way to reduce gas costs, and this is one of the best ones. Pooling resources has become important as network fees continue to rise, while we wait for scaling solutions to be safely implemented.

Also earning strategies are becoming more complex as the ecosystem grows. It is hard to keep track of all the opportunities on your own, and execute the best ones at the right time. Most of these yield aggregation solutions are also incorporating insurance coverage (Opyn and Nexus) to manage risk of smart contract bugs or hacks. Returns are a matter of trading off risk for reward, and there are a lot of things to consider when choosing a strategy. You also have to take into account your time horizon (short vs. long term), and higher risk associated with shorter timelines. Many of these solutions are providing strategies on behalf of the investors/stakers, that take many of these things into account. You can chose the best ones for your own situation. 

Yield Aggregators

Live and tested

Idle.Finance

This project supports different lending platforms and automatically moves (rebalances) combined funds from one platform to another to get the best rates. The smart contracts are audited and the app is easy to use. You can chose to get "best rates" or risk adjusted strategies (second one is insured). It worked well for me when I tested it. After you deposit stablecoins, you receive idletokens which are used for redemption and you can withdraw your funds at any time.This project is non-custodial and decentralised. It is a fairly low risk alternative, and you can currently earn about 6% APR on stablecoins like Dai. They are also incorporating yield farming to increase rates on supported stablecoins:

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Idle is in the process of incorporating yield farming for its new governance token called IDLE.They are also supposed to be partnering with Synthetix for some additional rewards, in the near future.

RAY Robo advisor (Staked.us)

The service is a centralised alternative to idle.finance, and you have to provide kyc/aml. The company behind it is primarily a staking service, and it also has the robo lending aggregator service. The smart contracts are Opensource, and rebalance funds automatically based on supported lending services like Compound, Dydx etc. 

Rari Capital app

According to them "Currently, Rari generates yield by depositing a combination of DAI and USDC to the lending protocol dYdX as well as DAI, USDC, and USDT to the lending protocol Compound. In the near future, we will be generating yield from more currencies across more lending protocols, among other strategies." They also take a 20% performance fee. Still pretty new, this one takes the approach of letting you invest in a fund, which they manage for you, so there is a certain amount of trust involved, and it is less open and transparent than some of the fully decentralised solutions. The current APR is 9%. The main advantage is "ease of use". Funds start earning interest as soon as they are deposited. 

1Inch

Most people don't think of 1inch as a yield aggregator. But it does aggregate liquidity from different providers to get good rates on swaps, and reduce slippage. It also has a feature which aggregates liquidity providers into 1 interface, so that you can contribute to the ones with the best yield. It includes all the major liquidity providers (below):

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In progress

Plutus

This is another yield aggregator for stablecoins, with the added feature of privacy. They will also be supporting derivatives and payroll and payments in the future. They have a pretty ambitious vision: "PlutusDefi is a protocol that unifies leading DeFi protocols and blockchain infrastructure by standardising communication between them to create and execute complex financial transactions, while championing Privacy, Anonymity and Sovereignty" We will see if they can pull it off, and get adoption. Their initial liquidity mining initiative experienced some glitches. 

Akropolis Protocol

They are similar to Plutus, but without the emphasis on privacy, and emphasis on interoperability. The smart contracts are audited by Certik. They have made the platform flexible for developers to build their own Defi products. They used the Robo advisor from staked.us (see above) for their lending aggregator platform (called Delphi). Their first product is called Sparta:

"So what can you do as a Sparta v0.1 user? Things that our members can do:

  • Contribute funds to the pool and hold internal pTokens (pool shares). Their price is determined by the bonding curve and changes as a function of liquidity amount in the pool. It is designed to allow for secondary liquidity management and our version of “ragequit”;
  • Take out an undercollateralised loans from the pool (providing only 50% of collateral, i.e. 50% LTV or Loan-to-Value);
  • Lend funds to members of the pool by staking in favour of their loan request and earn higher APR (please remember higher APR reflects higher risk)."

The main feature is the undercollateralized loans, which none of the other Defi lending platforms have yet. It is open and extensible, and will be interesting to see what other people build and integrate with this platform. They have an ambitious roadmap, which includes liquidity mining rewards (as of Aug 9th). Final details expected Aug 20/2020.

They also support cross platform features, and are involved in building on the polkadot ecosystem

Xio

This is a new approach to pooled staking rewards, which they call "flash staking". So, they deal with the staking lock-ins, and also make it easier for the average investor without technical expertise to benefit from aggregated earnings that are derived from staking various "early stage" projects, which is becoming very popular due to "Proof of Stake" consensus

"Through the XIO Dapp, users can earn instant upfront interest on various ERC tokens for staking. In short, it’s like Uniswap, but for staking instead of trading."

It is still in the early stages, and we will have to see how it pans out. But they are getting some good hype and promotion. 

KeeperDAO is an on-chain liquidity underwriter for DeFi

I like the concept of pooling resources and rewards for liquidations, and arbitrage opportunities. "The Priority Gas Auction is performed by multiple off-chain bots that constantly watch for liquidations and arbitrage to appear. When it sees these opportunities it engages in the game-theoretically optimal strategy to submit transactions. However, it’s not only these bots that can submit transactions. Anyone can attempt to use KeeperDAO assets. KeeperDAO contracts are permission-less, but enforce that non-profitable transactions are reverted, and incentivise users to return all of their profits." I think that the idea is to incentivise keepers to work together instead of compete with other for arbitrage opportunities. There are also LP's who provide liquidity to the system for the keepers to use for their activities. 

The system is currently running on mainnet and some people have tested it, and claim that the APY is 8-9%, but I have seen different numbers on their Discord channel. So, I think that we will have to wait a while until things settle down and we get more historical data to look at to get more accurate numbers. In the mean time, it is good to know that they take security seriously: "The security of the KeeperDAO protocol is our #1 priority; and the current set of smart contracts have gone through 3 external audits with no critical bugs found. We encourage users of the protocol to audit the contracts and security; and we will be undergoing additional audits for future releases." The project is live, but it isn't decentralised yet. They will also be implementing a Dao with governance tokens, and community voting. 

Yield aggregators with Incentives (Yield farming rewards)

Yearn.finance

This solution comprises a whole ecosystem of services. From ycosystem.info, scroll down to the yearn.finance product and go into the yvaults, where you can deposit USDC, or stake your ycrv tokens (from y.curve.fi- see below), and soon Link and SNX tokens. They will re-invest and grow your funds, by using different strategies, which are the best combination of risk/reward. There are some existing strategies provided by Andre Cronje (experienced, well known yield farmer), or contributed by the community for a share of the rewards. The governance token (called YFI), is decentralised, and the contracts are opensource. Version 1 is audited by Quantstamp, but V2 hasn't been audited yet, so you might want to wait for this. Insurance is also incorporated into the vaults, depending on the risk level. 

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This solution is a good way to earn good rewards, without having to do a lot of research and monitoring for the best opportunities as they arise. The best rate is currently in the curve.fi/y pool, and Dai is also very good. The link pool is not available yet, but should be ready soon, and then SNX will follow. 

You can also check your profits on y.curve.fi for the ycrv vault:

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Here is a recent article from Tokenbrice which further explains yearn, and yvaults. 

In addition, the easiest way to contribute to yvaults, is using the zapper.fi tool. You can contribute directly to the various vaults, without going thru all the steps by using the "invest" feature in Zapper. This will allow you to contribute any 1 asset (such as eth for example) and it will do all the necessary conversion/swapping steps for you to populate the vault directly. Here is a good video which explains the process. Here is some useful documentation for using Zapper to easily invest in various yield pools. Last word of caution is to use this powerful feature when gas fees are low, since it will do a lot of steps automatically. It will give you the estimate of total gas fees at the beginning of the process, so you can decide if you want to go ahead. All of this is also true for withdrawals. 

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Curve.fi

This is a bonding curve DEX/AMM for stablecoins and xBTC tokens. If you provide liquidity to any of the supported coin/pools, you get a share of the transaction fees. If you contribute to one of the pools that they are partnered with such as Synthetix and Yearn, you will also get additional rewards. For example, you can provide liquidity to y.curve.fi, and receive a ycrv token which you can stake on the yearn yield aggregator (discussed above):

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Also, curve has released their governance token called CRV, which earns additional rewards for users of the platform, as well as enabling users to participate in the governance decisions. See the Dao tab. Previous users of the platform will have vested rewards, and new or current users can stake their redeem tokens to earn CRV rewards. 

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Mstable (Musd)

You can deposit the musd stablecoin under "save" in the app, and get around 20% apr (currently):

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You can also contribute liquidity to one of the various pools, and earn MTA governance tokens as a reward:

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Token set protocol for aggregated, and automated trading/managing digital assets

The token set protocol is another good way to aggregate and automate trades, save on gas and reduce risk. Version 2 will have even more powerful features, and also be supporting yield farming for better yields with managed risk. Here is an example of an automated arbitrage and yield stablecoin set

Delegated and aggregated staking

Here are some examples of ways to aggregate and earn staking rewards

Introducing the APY.Finance project

This one will be launching at the end of Aug/Early Sept. From what information that I can gather, their strategy is very similar to YFI, and their yearn vaults (and tons of clones at this point, too numerous to mention). So, we will have to wait and see what they come up with, but it will be hard to compete with the likes of yvaults which already farms risk adjusted yields, gas optimized, for their users, has network effects and liquidity, and reputation, and a good decentralised governance and community. All of that takes time to mature. But you never know what could happen (can you spell rage quit?), so its always good to have alternatives. 

Balancer - see previous article where I talk about how to earn with BAL and rewards

There are tons of projects now using Balancer to mine liquidity, earn bootstrapping rewards for their token, earn transaction fees for swapping, and also BAL tokens (which have now been listed on Coinbase).

Pools.vision is a great  tool for finding the best balancer  pools to invest in, based on APR and takes into account rewards for farming bal tokens:

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There are also several projects using Uniswap liquidity pools, which still have higher liquidity, but no governance token for Uniswap, as of yet. This is highly anticipated, if it happens since they havn't announced anything yet. 

Synthetix - see previous article about how to earn with SNX and rewards

Gas fees on swaps and deposits/withdrawals

The best way to reduce network fees is to use a yield aggregator to share the costs and other resources, as per above. 

If you are using Synthetix , you can also use this very cool site which allows you to use the Chi token to save on gas fees when claiming SNX rewards from staking. There will also be pooled SNX staking vaults from Yearn.finance, as soon as they are approved by the community governance shortly. This will allow you to take advantage of Synthetix smart contracts which are complex, without incurring so much in the way of gas fees, especially if you don't have a huge investment. 

Another good way to reduce gas costs is to enable the chi token when doing swaps in 1inch.exchange. Here is an article which explains in detail. Another thing that you can do is to check ethgasstation.info and try to do your transactions when gas fees are lower. Yet another alternative is to use Loopring L2 solution for trading/swaps. It isn't quite as convenient as an AMM like Uniswap or balancer, since you have to deal with transferring your funds to/from the exchange, and mess with order books, which aren't as simple as the other Dex's. Another thing that you can do to reduce gas costs is take longer term positions. If you keep buying and selling over short time periods you will incur so much in fees, that you may end up with losses instead of gains, even if you made the right decisions (unless you are trading huge amounts). 

There aren't any ideal solutions yet, but they will be coming soon as the scaling solutions start to proliferate. First L2/State channels and sidechains, then interoperable chains like Polkadot or Fusion or Cosmos, then Eth2, in the longer term. 

Conclusion

The first group of alternatives are safer, but also have lower returns. The second group with additional yield farming incentives have higher yields because they take advantage of defi composability. They re-invest the same funds on more than one platform. So, you get higher rewards, but also more risk since you are relying on more smart contract platforms. When there are more moving parts there are more possibilities for things to go wrong. Also, many of the liquidity mining rewards are only temporary, so they expire, usually in a few weeks, or in some cases, months. So, they have to be monitored, and that's why an option like Yearn vaults is so good. They do all the hard work for the pool, and the gas fees are shared, as well as the rewards (in exchange for liquidity). 

So, you can chose a strategy which is good for you and your situation, keeping in mind that the rewards are proportional to the risks. A good approach is to diversify your portfolio by splitting your investments into different services, and not putting all your eggs into 1 basket. Be careful to chose projects which incorporate insurance, and audits. Also be mindful about which of your investments involve stablecoins (Ex. MUSD, USDC, Dai etc.) which won't move with the overall market, or volatile coins (ex. BTC, Eth, LINK, SNX, BAL, MTA) which will tend to go up when the market index increases. In a bull market, you probably want to increase your exposure to the volatile coins, and decrease stablecoins % of total. The opposite is true for a bear market. I try to focus on the medium to long term since its so hard to predict what can happen in the short term. 

As usual, feedback is welcome. I would like to hear what you think. I will update the post as new services and opportunities become available. 


fblauer
fblauer

Self styled crypto enthusiast. Unbank yourself


Yield Hacking with Defi
Yield Hacking with Defi

This is a blog about the intersection between crypto currency and finance. I have been testing and evaluating various defi (decentralised finance) and opfi (open finance) projects. This includes lending and borrowing markets, decentralised exchanges, automated market making, smart contract wallets, and tools for measuring and monitoring return on investment. All enabled by blockchain technology, with decentralised, opensource and audited smart contracts. These systems are interoperable and composable.

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