Defi Yield Farming/Liquidity Mining

Defi Yield Farming/Liquidity Mining

By fblauer | Yield Hacking with Defi | 24 Jun 2020


Introduction

This a hot new trend involving Defi composability (interoperatbility), and issuance of governance tokens. The assumption is that they will accrue value in the future, since the project governors will vote to allow cash flow earnings to accrue to the governance token holders. It is better than simple staking since it rewards participation in the project, and network adoption instead of only ownership. So it is a good way to raise funds for further development, after a project is up and running. It is also more compliant with legal regulations than an ICO. So, it benefits the projects and the community. This emergent framework for rewarding participation, instead of ownership is called SAFG. 

People have been taking advantage of this trend by re-using their digital assets on multiple platforms and doubling up on the yield. A simple example would be lending a token on Compound, getting a ctoken in return, then depositing that token on Curve liquidity pool (or Uniswap pool) to get transaction fees on the same tokens that they are earning interest. In addition, you are also getting a small share of the distribution of the new COMP governance tokens (which have been going way up in value). Another approach is to take a loan to get part of the COMP distribution, and invest the loan proceeds on another platform. But that comes with risk of collateral liquidation if the pledged assets go down in value. So, this method has to be monitored more closely. See previous articles in my Defi Blog, if you want to know how to use any of the tools discussed below. 

Yield Farming (Liquidity Mining) ROI/APR

  • Yieldfarming.info - This is the best one for ROI on yieldfarming investments. Don't be put off by the spartan text based UI. It is the most important tool, if you are using doing Defi/yield farming. All of the key pools are hyperlinked. If you click on any of the 9 pools listed, it will show you the full APR calculation, your pool amount and share, and rewards.Credit to Weeb McGee for developing (you can follow him on twitter)

4a96dbd9950a52c97882526f268f6fd49a5e4a08ef73ad8f69ef44663dea3554.png

Current farming opportunities

  • Comp Tokens (Compound finance)
    • Borrow USDT using eth as collateral (and get part of the COMP distribution) Pay interest at current rate
    • Deposit the USDT back to Compound to get interest at lower rate but get part of the COMP distribution also
    • Or use Instadapp to use leverage to maximize yield (higher risk)
    • Or you could just swap eth for COMP on Uniswap or 1inch, and then deposit them into a Liquidity pool on Uniswap (ex Eth/COMP pool) and earn transaction fees, and get the increase in value of COMP tokens
  • BAL Tokens (Balancer Labs)
    • Provide liquidity on balancer platform to get some of the BAL token distribution, on the same tokens that you are earning transaction fees from the balancer exchange
    • To double up - combine both Compound and balancer rewards - deposit coins on compound to get ctokens, then deposit the ctoken on a Balancer pool (see predictions.exchange to find the best ones). But be aware of the high ethereum network fees when using multiple/complex smart contracts
    • Also, as user "Rookie" points out below, in the comments, in the case of ctokens on balancer, be sure to chose a Balancer pool which also supports COMP, or those COMP bonuses will just accrue to the pool, and not you personally
  • mStable - this is a metastablecoin with high yields for depositing and staking, similar to curve.fi. They are just in the process of releasing their governance token called MTA. Here is a good article from their blog, which talks about how to provide liquidity on their Weth / Musd or Usdc / Musd or MTA / Musd pools on Balancer to get a share of MTA, transaction fees from swaps, and also BAL tokens at the same time. 
  • SNX (synthetix) integration with Balancer and Curve.fi and Ren
    • Convert eth to sBTC, RenBTC or WBTC on 1inch.exchange
    • Deposit on sbtc.curve.fi. Earn transaction fees and also accrual in value (if BTC goes up)
    • Stake on Synthetix/Mintr. Get additional rewards from Synthetix

79d469fbb2a4b6e6aae4eaed2ef4de902e9742d508c8686bc8c8d01f22390857.png

    • Synthetix also has a similar process for Susd on Curve, and also the Weth / Seth pools on Balancer. Here is a good article from the Zerion blog which explains in more detail how to use these
    • Synthetix and Idle - Mint sUSD and deposit on Idle to earn interest. Soon you will also be able to earn BAL, and CRV by posting sUSD on Idle finance
    • For example you could use Zapper.fi to contribute to the SNX/USDC liquidity pool on Balancer to collect liquidity fees and BAL tokens. You can also stake for the SNX rewards from the same interface. Here is an explainer video.

7076040a0133a31a913a116a6413ea8972bb521c14a3d6c7b5c6f2a43b1d5f2c.png

  • YFI tokens (Yearn and Curve) (highest yield currently)
    • Deposit one of the 4 supported stablecoins (below) on y.curve.fi liquidity pool and earn transaction fees on the  ytokens and you can also earn YFI governance tokens by staking them directly on same the interface
    • Here is some information about the YFI governance tokens for yearn.finance
    • Here is a recent article from Boxmining which describes the whole process in detail, and also talks about the 2 other balancer pools, which I don't want to discuss here at the risk of making this article too complicated. If you are advanced and interested in the details, you can just read all about it in the article above, or guide below

53e43e167255f3b0e96405b2d22daaf2bb5d9c07c4c60fccecd8cb891929f8c3.png

Here is a another good guide on how to earn YFI governance tokens. Currently, the price is going crazy

96689a7c5300d5a3105f8a8d9380c7fdd934648c4572e64adbc3111d264e8654.png

89323ed96752fbc4eeee5249a8fcb9f1aa1248d911b5a6b6e1d42679d3a4270c.png

 

8b5bd2f7122ced73bce322fb65451b630a0c6ea53b4ca5528c2187ce431307fd.png

  • UMA - Liquidity mining process has just been released. You can check current reward yields in the yieldfarming.info tool. Currently, it is about 50%, (not including the BAL rewards). They are planning to issue rewards over 6 weeks from now. 
  • BZX (Fulcrum) - Share of fees for staking BZRX governance tokens on balancer + share of balancer fees. Here is an article on how it works. If you buy the tokens on Uniswap, you will also be entitled your share of the rewards, as detailed in the guidance. 
  • Ptokens - Stake in the pNetwork DAO. Earn 42% rewards for voting (Similar to KNC staking)
  • aTokens (Aave and 1inch and curve)
    • Deposit any of the tokens supported by Aave, get atoken and earn interest
    • Find one of the atoken pools on Balancer and deposit there to earn some BAL. Use this tool to find the best ones
    • Or Convert the atokens on 1inch.exchange to any of the tokens supported by any of the pools on Curve.fi, or Uniswap V2 and earn transaction fees
  • Uniswap/Aave - You can also use the Uniswap pool tokens as collateral for loans on Aave
    • Deposit tokens and eth pairs on Uniswap pools and get the Pool tokens (get the ones with the best rates on zapper.fi/invest (scroll down and sort by Net ROI)
    • You can get the pool contract address on the pool info page (if you need it)
    • Use the Unipool tokens as collateral to get USDT (for example)
    • Deposit the borrowed USDT on Compound to get COMP tokens
    • Monitor the loan on Aave to make sure the value doesn't fall below the liquidation ratio
  • Gnosis - GNO tokens
  • dForce Kicks off Liquidity Mining — starting from August 3, 2020

Future (In-progress or Not yet available)

Additional Yield Hacking Opportunities (to be covered in future articles)

  • Yield aggregators like Yearn.finance, Idle Finance, RAY robo advisor, Plutus, Acropolis, Rari Capital
  • Sell Insurance on Opyn (Put Options)
  • Buy real estate on RealT (Rental properties)
  • Buying synthetic gold derivatives

Conclusion

There are lots of different ways to participate with varying rates of risk. This trend is very hot right now, but will inevitably cool off. And be aware of the inherent risks of interdependence. The more platforms that your connected investments depend on, the more chance that something could go wrong in any one of them. And the more you are leveraged, the more chance that the value of your collateral could go down, and trigger liquidation. So make sure to monitor your investments, especially if your are leveraged. Another caveat are the network fees, which can really add up when a lot of complex smart contracts are involved. Here is a good article from Kerman Kohli, which explains the gas fees in more detail, and another great article that I just discovered by Tokenbrice, from Monolith

I will update this article as new opportunities become available. Happy farming, and stay safe. 

 


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.

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.