Humble farmers around the globe are currently united behind a singular banner, the trusty tractor. You can argue that Harvest.Finance's decision to use a tractor to represent the logo for their native token (FARM) was an excellent marketing choice. Indeed, when we see a tractor heading down the road laden with freshly harvested crops, or, we see one ploughing the spring fields and preparing for the start of the growing season, we all associate them with one thing...purpose built for hard gaft. In that respect the Harvest.Finance platform (and FARM token) is no different, built with a plan in mind, functional, no frills and capable of doing the heavy lifting.
In this article we're going to take a deeper dive into the agricultural crypto-yielding strategies that we can employ, through Harvest.Finance, to work towards our financial goals. Traditional financial products often produce 'Key Facts Illustrations', which can be used by customers as a way of determining if products suit their needs and are comparable to other market products. Similarly, I hope to be able to show how to build up (through examples) pictures of yield farming technique to create our own 'Key Farming Illustrations'.
Before moving onto the products and examples it is extremely important to note that none of this information should be taken as financial advice. Only you are responsible for managing your own finances. Cryptocurrencies and smart-contracts (even audited) carry underlying risks that may not have been considered at the time of their inception. As such please, make sure to take the time to really work through the numbers before making any critical decisions
In order to make my illustrations clearer I've used dollar ($) values for all items throughout along with the following assumptions:
- Smart-Contract Transaction are assumed to be completed at a price of 40 Gwei and with the following estimated contract gas limits:
- Harvest Standard Deposits/Withdrawals - 188,176
- Harvest Profit Sharing Deposits/Withdrawals - 458,736
- 1Inch Liquidity Deposits/Withdrawals - 314,143
- UniSwap Liquidity Deposits/Withdrawals - 165,031
- Gas fees $ cost were estimated based on an ETH value of $1341.91
- ROIs account for both deposit and withdrawal fees in the calculations
- * Profit Sharing ROIs assume that earning are harvested and summitted to the profit sharing pool once per month
- Base investments of $1000 were used in all calculations
- All APY rates are as of the time of writing.
These numbers were lifted from executed transactions for the relevant smart contracts and only represent estimated gas prices.
To cut our teeth on the first product we're going to start of simple, with stablecoins.
I've called this product 'The Stabilizer' and if you ever had training wheels on your first bike while you were growing up then you'll see why. The general premise of this product is to ease us into the yield-farming world reasonably safely, with a relatively low volatility asset that is pegged to the US dollar. I personally view this as an extension of traditional savings, we're all aware that central bank interest rates are extremely low currently, so an alternative to these could perhaps be to lean on DeFi where we see much more respectable returns for holding cash.
Earnings for this product are in IDLE / COMP and FARM so users would need to factor in either holding them to build reserves or perhaps converting to USDC at regular intervals. For now I've assessed this to have the potential to be suited short-long term holding, however it is critical to understand the risks. Given that the overall value of this product is tied to the dollar de-valuation of currency puts the long-term holding of this product at risk. Though if we were looking for a place to park some USDC until the next bear market then perhaps this wouldn't be a bad option.
In terms of onboarding we're talking minimal gas fees as we can deposit directly in USDC so we're only needing to interact with the contracts once on deposit and then again on withdrawal. It is possible to add some additional side earning via profit sharing though the low earning of FARM tokens on this one means that doing this can get costly.
Next up if you're one of those investors who looks as the stacking of 1Inch tokens as a forward planning strategy then these pools may be for you.
The 'Usurper' waits in the wings, growing ever stronger waiting for the day that it can topple BTC for the throne and take it's place as number 1. However, until that day, let's put those pesky ETH to some use. This product is based on an extension of liquidity provision. The principle being that we can both earn liquidity fees over at 1Inch and also lock in the LP tokens into Harvest.Finance to stack both FARM and 1INCH tokens.
Note that this product is a little more complex than the previous one by requiring interactions both with the 1Inch LP contracts as well as with Harvest.Finance. Indeed, if we look at the 1month estimate there isn't a lot in it over the previous solution. However, as time goes on the higher earning rate closes the gap on those extra gas fees and we see it pull away to a very respectable 89% after 12months.
In terms of risks it is critical here (more so than with others) to consider impermanent loss, particularly when paring a non-volatile asset (USDT) with a volatile one like ETH. On the plus side this is one of the most popular pair on the market, so you can help to offset these losses with earnings from liquidity provision. Again, it is possible here to earn extra on the side but would up the fees substantially, perhaps a once per 3/6 months collection of FARM and stake in profit farming would be appropriate.
The final product example we'll look at today is for those who want FARM tokens, as many as they can get as quickly as possible., this is intensive farming.
So you have some cash burning a hole in your pocket and you want to use it to earn as much FARM as possible but don't just want to buy on the open market. This solution is the one to consider, called the 'Gold Standard' because it utilizes a DAI-BSGS (Basis Gold Share) liquidity provision to earn FARM tokens as well as the profit sharing provided by Harvest.Finance. The general process is follows this:
- Provide liquidity on UniSwap
- Invest LP tokens in Harvest
- Claim FARM each month (from month 2 onward)
- Invest claimed FARM into profit sharing pool
As you can see there is a little more in the way of monthly management to this process and more contract interactions which ramps up the fees somewhat. However, given that the bulk of the fund earnings are being made though earning FARM tokens it is easy to offset the fees by feeding them back into the Profit Sharing regularly and compounding the profits further.
It would be good to ask ourselves "Why would we ever pick the other options, this looks great". The point here though is that this is a relatively new product and therefore is offering considerably higher rates. This means the biggest risk for this kind of fund is that the rate will drop drastically as demand increases for the product. We also need to contend with the risk of BSGS tokens which are relatively new to the market and perhaps not as rigorously tests as other more traditional options. Because of these risks I'm inclined to think that we're looking at a much more short term investment choice.
Sharing in the Profits
As an added note I thought it would be useful for folks to consider a few scenarios for making use of the profit sharing FARM pool, particularly as Publish0x users start to gain more access to this token and are keen to earn on it. The rate at the time of these examples is 143.53% and FARM price of $151.76
Remember this is based on gas fees with a price set at 40 gwei * 458,736 limit. If you're able to get a better price then the break-even will be achieved sooner.
This process has actually sent me down a rabbit hole now and I'm looking at my portfolio to see just where I can release funds to get stuck into the DAI-BSGS strategy. Personally, I'm a big fan of the FARM tokenomics and believe that this is the easier option if you're looking to stack a single token. I'd be very interested to hear if anyone else has similar solutions and will watch for other similar articles as I believe that I've only just scratch the surface.
During the process there were a few key things that I think anyone should consider when producing their own Key Farming Illustrations:
- Factor in the fees - Don't just look at the % and tell yourself you'll be rich, consider the upfront cost as well as the withdrawal costs in your calculations
- Layer investments - If possible consider Profit sharing in the calculations it can be a nice added bonus to the FARM stack
- Consider Choices - Think about your investment coins/tokens and what function you want them to have. If you're planning on LP then know your impermanent loss risks and ask yourself if that is acceptable. If you don't want to risk losing out on ETH value in a bull run then maybe don't deposit that one
- Do your MATHs - Run the numbers twice (don't trust mine alone!) make sure you've factored it all in before pulling the trigger
On that note I think my brain needs a rest, I think this meme sums it up for you:
Thank you very much for reading, stay humble and keep Farming! Good Luck y'all!