[EXPLAINED] Harvest Finance $FARM Profit Sharing Pool

[EXPLAINED] Harvest Finance $FARM Profit Sharing Pool

By Yaz Sheikh | Trading Blog | 27 Jan 2021


The $FARM Profit Sharing pool is one of the hottest things in the entire Harvest Finance ecosystem.

Besides all these interesting yield farming strategies they have to offer, Profit Sharing pool is one of the platform's core features. It is essential for every defi farmer to know how to use it and how it affects $FARM tokenomics.

First, you can find the Profit Sharing Pool on the Harvest Finance “Earn” page. It is the first farming strategy on the top left corner:

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This pool is by far the second most active staking strategy on the entire Harvest Finance protocol. In fact, it is so popular that over 73.9% of the entire $FARM coins in circulation are currently staked in there;

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Source: https://farmdashboard.xyz/

What's the main reason people keep their $FARM tokens inside the Profit Sharing Pool? 

Take a closer look;

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Its APY is just too good, making it a desirable spot to put your idle $FARM into and what's more, it's really simple to do so.

Now, where does that high APY come from?

Before I get to that, let me quickly try and explain what APY is, as there is always confusion between APY and APR.

APR is your Annual Percentage Rate; this is the return on your investment you can expect on your asset over the course of a year. APY stands for Annual Percentage Yield. It is your return on investment you can expect if you keep compounding it. This means that you continue to let your interest accumulate on top of your original investment - leading to higher gains.

The Profit Sharing Pool APY has been pretty lucrative since its inception;

9dc87b7193e228688464d6e2e82f09afa74e63702886a2e5a5902dcd251ed998.png

Source: https://farmdashboard.xyz/

At one point, it reached as high as 700% APY, but as a rough estimation, an average for the past two months sits between 100%-150% APY. 

ELI5: Where does that APY Come From?  

So, where does this magical APY for $FARM actually come from? 

You can look at the entire Harvest Finance protocol as a cash generator, with $FARM itself being a cash flow token.

The Harvest Finance protocol has many different yield farming strategies to choose from, depending on what assets you currently hold. Here is a quick screenshot of some of them on the front page; quite a lot!

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Users (farmers) that deposit their assets into these specific pools earn the corresponding APY.

Looking at the screenshot above, let’s say that a Liquidity Provider made a deposit into the MGOOGL-UST pool and is earning a total of 216% APY at the moment.

Now, as the pooled LP funds are farmed on the selected strategy, 70% of the rewards made from this are automatically given back to the depositors and compounded. The other 30% of the rewards are converted into USDC and used to buy the $FARM token itself. This 30% is to be used in the Profit Sharing pool to be distributed to anybody that is staking $FARM there. 

This is how Profit Sharing Pool manages to keep such an attractive APY.

Deposits that go into the specific yield farming strategies on the front page leads to increased profits generated on the platform, which leads to further profits for those staking $FARM in the Profit Share pool.

How to Stake $FARM in Profit Sharing Pool? 

So, how do you get a share in on all of this action? 

It is fairly simple. First, you will need these two ingredients; the $FARM token and a Metamask wallet.

You can get the $FARM from a variety of centralized and decentralized exchanges, including:

In my opinion, Uniswap is probably the best place to pick some up.

The other ingredient is MetaMask. If you need a tutorial on how to set up a MetaMask, take a look here.

Once you have MetaMask installed and your $FARM is sitting in the wallet, the first step is to head over to the Harvest Finance “earn” page. There you will see the following;

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The Profit Sharing pool is the first on the list. Click where it says “188.49%” APY to bring up the following dashboard;

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We need to connect our MetaMask wallet to the platform. Go ahead and click the highlighted “Connect Wallet.” 

You will see the following two options to choose from; 

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We want to connect our MetaMask, so select that.

After clicking MetaMask, a separate window should pop up asking which accounts to select (if you have more than one). Choose the account where your $FARM is located and hit “Next”;

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You will then be asked to confirm this by hitting “Connect”;

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Once connected, you should see your $FARM in the “Your Unstaked Farm” section;

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We now need to deposit this $FARM to get it staking. In the section beneath the highlighted box, enter the amount of $FARM you would like to stake, and then hit ‘Stake”;

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This should bring up another separate MetaMask notification window asking you to confirm that you would allow the Harvest Finance protocol to utilize your $FARM. Notice that there is a transaction fee involved with this. Simply hit “confirm”;

7b07c09e3884d3c47b50a7c477ead49dbe902f320a763fcf9464457dfb10b81e.png

Now, you need to wait until this transaction has been confirmed on the blockchain, which should take a few minutes. 

Once the transaction has been mined, another MetaMask notification will pop up asking you to confirm the coin’s deposit into the protocol for staking. Again, there is another fee here that is much larger since you are interacting with a smart contract. Typically, the fee shouldn’t be this high, but because Ethereum blockchain activity is quite substantial today, the fee is pretty enormous. 

If you are happy with the fee, go ahead and click “Confirm”;

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Again, you must wait for that transaction to be mined on the blockchain.

Once it has confirmed, you should see it represented in the “Your Staked FARM” section;

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You will immediately notice that this number is climbing. This is because the rewards are compounded automatically, meaning you are earning an APY based on your initial deposit and the additional rewards as you consistently mine them.

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Yaz Sheikh
Yaz Sheikh

Publish0x Team Trader, Analyst, and UFC FREAK!


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