How to Use Torches Finance to Earn KCS?

By Torches | Torches | 23 Aug 2022

We are pleased to announce that sKCS token has been listed on Torches. Now users can deposit their sKCS or lend sKCS by using other crypto assets as collateral.

To thank our users for their continued support, we will continue to update a series of arbitrage techniques on Torches for you to maximize crypto asset utilization and obtain excess returns. As the second instalment of this series, we will introduce to you how to use sKCS to earn KCS on Torches without loss.

Introduction of sKCS.io

sKCS.io is the first liquidity-staking protocol on KCC, dedicated to providing users with a simple and easy-to-use DeFi product with stable returns.

Users can stake KCS into sKCS.io and receive sKCS. sKCS can be used to participate in other DeFi products to obtain higher returns or unstake back to KCS at any time. As an underlying asset protocol on KCC, sKCS.io would like to help users experience the composability of DeFi protocols in one click.

Now, $sKCS has been selected for the Liquidity Mining of MojitoSwap, the largest DEX based on Total Value Locked of the KCC ecosystem. At the same time, sKCS goes live on Torches, Torches has supported crypto asset deposit and lending services of BTC, ETH, KCS, USDT, USDC, and sKCS. And then, we will tell you how to earn KCS by using Torches.

Here are the preparation and theory of the arbitrage opportunity:

Preparation

Set up your KCC Wallet first
KCS holding >= 1 KCS

Theory

First, the mechanism of sKCS.io is to stake KCS to get sKCS or unstake sKCS to get KCS, so we can think of it as a KCS/sKCS trading pair. Also, MojitoSwap has a KCS/sKCS trading pair. We can make an arbitrage trading program and the final profit will be received in KCS.

There are three KCC projects, Torches, sKCS and MojitoSwap, that will be used during arbitrage. Users can borrow some KCS on Torches to avoid the price fluctuations and use the following two ways to make some money: Firstly, making a profit from the different prices between sKCS.io and MojitoSwap; Secondly, staking KCS/sKCS on sKCS.io and MojitoSwap to earn an APY up to 50%.

Using sKCS to Earn KCS without loss on Torches Finance

Torches is a KCC-based lending protocol. It recently opened $TOP Mining and users can get an additional $TOP bonus by both lending and depositing. People who want to participate in KuCoin Spotlight can use their crypto assets as collateral to lend KCS from Torches. By doing this, people can still earn deposit interest and $TOP by depositing money to and borrowing money from Torches. All people need to pay is a little interest.

Here are the detailed instructions on how to use sKCS doing the arbitrage programming

At the beginning of arbitrage, we need some KCS as a fund. If you don’t have KCS, you can follow the tutorial to deposit stablecoins such as USDT, and USDC to borrow KCS on Torches.

1. Visit Torches Finance official’s website and connect your wallet

2. Click “Banking” on the top menu.

3. After that, you will see many crypto assets listed under the crypto market dashboard. You can choose which asset you want to deposit by clicking the “Deposit & Borrow” button.

4. To use your crypto assets as collateral, You have to deposit KCS or other crypto assets to Torches first, you can simply select “Deposit” and enter the amount of KCS you want to deposit, then click the “Deposit” button.

5. After depositing your crypto, we are going to set your assets as collateral before borrowing assets from Torches.

6. Now, you can lend KCS from Torches. Simply click the “Deposit & Borrow” button and select “Borrow”, enter the amount of KCS to borrow, and then click the “Borrow” button.

The first way: using the different prices of sKCS between sKCS.io and MojitoSwap to make a profit

The first step is to check whether there are any arbitrage opportunities. In other words, you should check the price of sKCS on sKCS.io and MojitoSwap. If the prices are no different, there are no arbitrage opportunities; And if the sKCS prices are different between these two platforms, the arbitrage opportunity comes and the following two scenarios apply.

The First Scenario:

In normal circumstances, sKCS will increase price over time. If no one sells sKCS on Mojitoswap, it would cause sKCS to get cheaper on MojitoSwap. At the time, we can buy sKCS with KCS on MojitoSwap and then use these KCS to unstake the sKCS that are staking on sKCS.io to get more KCS, which makes us get a profit on the difference. Although unstaking sKCS usually takes 3-6 days, there is no loss from price fluctuation because our KCS is borrowed.

For example, the current exchange rate on sKCS.io: 1 sKCS = 1.1 KCS; The purchase price on MojitoSwap: 1 sKCS = 0.8 KCS. Our arbitrage trading program can buy a 1 sKCS on MojitoSwap with 0.8 KCS, and then unstake 1.1 KCS on sKCS.io, making a profit of 0.3 KCS (1.1 KCS - 0.8 KCS).

Of course, there is also a slippage problem when trading at MojitoSwap. For example, the average price of buying sKCS on MojitoSwap will increase when you buy more sKCS, so you also need to consider how many sKCS to buy at once to maximize the profit.

You can try some possible quantities for high frequencies. For example, you can buy 10 sKCS or 50 sKCS or 100 sKCS at once and find out which is the most profitable one; Or you can also calculate it by the slippage formula of swap.

The Second Scenario (no unstaking period):

If users buy a massive amount of sKCS on MojitoSwap, it will lead to the price of sKCS on MojitoSwap being more expensive than sKCS.io. Then we can get sKCS on sKCSs.io by staking KCS and selling these sKCS on MojitoSwap to get the profit from it.

These are instant and there are no access limitations.

For instance, the current exchange ratio on sKCS.io: 1 sKCS = 1.2 KCS; The selling price on MojitoSwap website:1sKCS = 1.4 KCS. We can stake 1.2 KCS on sKCS.io to get 1 sKCS, then sell 1 sKCS to get 1.4 KCS on MojitoSwap, making a profit of 0.2 KCS (1.4 KCS-1.2 KCS).

The second way: staking KCS on sKCS.io and MojitoSwap to earn an APY up to 50% with low risk

sKCS.io now offers an APY of up to 7.17%, much higher than the APY of 2.47% provided by the KuCoin Bonus product. You just need to follow the tutorial below to get an APY of 7,17% with one click.

1. Visit sKCS.io official website and connect your wallet. Enter the amount of KCS you want to stake and then click the “Stake” button.

2. Next, click the “Import token into wallet” button and stake the sKCS from your wallet to enjoy an APY of 7.17%.

3. After that, for increasing your income, visit MojitoSwap's official website and click “Trade” on the left menu. Click ‘Add liquidity’ and make sKCS and KCS as LP tokens with a ratio of 1:1. Then you can wait to enjoy an APY of 440%.

4. Then, staked LP tokens in the MJT staking pool and then you will receive MJT as a reward. At the same time, you can stake the rewarded MJT in the MJT staking pool to earn more MJT.

5. Finally, you can enjoy an APY of 100% after the above steps.

After one year, regardless of the price changes of KCS and MJT, the value increase of the assets can be calculated as:

Principal: 400 KCS=4000 $

Income: 200KCS*7.17%+$1,600MJT+$448MJT=2191.4

Yield = 2191.4/4000=54.7%

Without considering the protocol being attacked, the return is still considerable in a bear market, especially for the token holders who manage a large size of assets.

It is all done! You can take the KCS you borrowed on Torches and use the arbitrage programming to earn a handsome profit without loss.

Disclaimer: （1）This article is provided for informational purposes only and does not constitute investment advice. （2) Please be aware of liquidation risk and play at your own risk.

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