Tag: Yield Farming

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Crypto Daily Topic

Top DeFi Tokens of 2020: Check Out Number 5

Which are the best DeFi tokens of 2020? DeFi tokens have had a great year. It’s not an exaggeration to say they could very well eclipse ‘normal’ cryptocurrencies in the future. As DeFi continues to explode and the year nears a close, it helps look at the tokens that have defined 2020 and will probably continue to do so in the coming year.

Which are the best DeFi tokens of 2020? DeFi tokens have had a great year. It’s not an exaggeration to say they could very well eclipse ‘normal’ cryptocurrencies in the future. As DeFi continues to explode and the year nears a close, it helps look at the tokens that have defined 2020 and will probably continue to do so in the coming year.

Which are the best DeFi tokens of 2020? DeFi tokens have had a great year. It’s not an exaggeration to say they could very well eclipse ‘normal’ cryptocurrencies in the future. As DeFi continues to explode and the year nears a close, it helps look at the tokens that have defined 2020 and will probably continue to do so in the coming year.

This list doesn’t just follow the tokens that are the highest in market cap. It also looks at the most promising and exciting tokens. 

#1. Chainlink 

Chainlink is a decentralized oracle for connecting blockchains to external data and information. The Chainlink protocol, which includes the LINK token, allows smart contracts to operate without relying on permissioned or centralized information. For instance, a developer can run a sports betting contract that relies on an external oracle for sports scores. Chainlink has proved especially popular, with countless DeFi protocols including Aave, Ampleforth, Celcius, Arbol, yearn.finance, Nexus Mutual, and Synthetix all utilizing its smart oracles function. This popularity has catapulted it to the top ten in market cap, sitting at #5 at the time of writing. The LINK token, which began the year going for $2, already hit $12. 

#2. Maker (MKR)

Maker is one of the earliest stablecoins in the DeFi space and one of the most resilient. Despite (and probably because) of its low total supply of slightly more than a million, the token is a huge hit in  DeFi, judging by its current per-token value of $513. And this is a climbdown from the highs of $1,700 in 2018 before the token plummeted during the 2018/2019 crypto winter. In 2020, it got a reprieve after reaching $600 this year. With its MKR token, the protocol makes up what is probably the best example of a stablecoin system: a collateralized debt position powered by its  stablecoin – DAI, which maintains stability for the protocol by using various economic incentives. MKR will be one of the tokens driving the DeFi space in the near future and beyond. 

 #3. Aave (LEND)

Aave is an open-source, decentralized protocol that allows users to create money markets, earn interest on their deposits, and borrow funds through the LEND token. With a market cap of $859 million, Aave is currently the 4th biggest DeFi token. Aave has had an incredible year. It started off at a mere $0.009 in  January but has now clocked $73 per token, which is remarkable even in crypto. 

#4. Synthetix Network Token (SNX)

Synthetix is a blockchain protocol that lets anyone gain exposure to a wide array of assets. The platform is credited for introducing yield farming in DeFi, though it’s now been overrun by platforms like Compound and Aave. Still, the token continues to ‘hold the line,’ as manifested by its current position of #9 among  DeFi tokens and #40 among all cryptocurrencies. With a market cap of nearly $500 million, SNX demonstrates its resiliency. Synthetix supports a smart contract infrastructure and incentivization system that will continue to propel it upwards. 

 #5. Dai (DAI)

Part of the Maker ecosystem, DAI isn’t a token that you buy to HODL. Still, it’s an excellent idea to buy the token and hedge your portfolio against volatility. Dai is probably the most elegantly designed stablecoin in the world today, with an ingenious incentivization and collateralization system that securely puts its value at a 1:1 ratio against the US dollar. While other stablecoins achieve stability by using clumsy ways like holding US dollars in the bank, Dai uses a more accurate and flexible tech-based system. Anyone can also create their own Dai if they put up collateral. 

#6 Compound (COMP)

Compound is a DeFi protocol that allows anyone to lend, borrow, and provide liquidity and earn returns. Comp exploded after it started distributing its native token, COMP, in June this year. It’s definitely one of the hottest tokens in DeFi right now, featuring a market cap of $526 million and a per-token value of $124 at the time of writing. COMP is an Ethereum-based mechanism used as a governance mechanism of the Compound ecosystem. As the Compound platform continues to expand, we’re sure to see the value of COMP following the lead. 

#7. 0x (ZRX)

0x is a decentralized exchange protocol that allows developers to create their own exchanges. The project’s founder calls it the “Craigslist for cryptocurrencies” in that anyone can build an exchange and post it online. Despite its promising value proposition, the 0x token, ZRX, has had the slowest growth this year. In January, you could buy the token for around $0.20, and it’s now sitting at $0.36 at the time of writing, with a market cap of $273,926,375. But the dismal growth of the token does not discount its potential to break through in the future. The 0x token is one to keep sights on. 

#8. Ampleforth (AMPL)

Ampleforth kicked off the year trading at around $1, went to rise to $4 in July, before sharply clamping down to around $1 again. Ampleforth calls itself a cryptocurrency “like Bitcoin,” but with a daily change in supply, insuring against market shocks.  Ampleforth wishes to solve what it calls the “dangerously correlated” crypto market by adding diversity to the ecosystem. While most cryptocurrencies follow the Bitcoin price pattern, the AMPL token matches to its own beat. This could prove an excellent hedge for your crypto portfolio. 

#9. Augur (REP)

Augur started the year sitting at around $9, and if now trades at $14 in November, a dip from around $20 in August. Based on Ethereum, Augur, via its native token – REP, aims to power a prediction market where users can earn money if they predict winning outcomes. Augur also acts as a decentralized oracle for verifying real-world events. These events could be anything – from natural events to election results to football matches’ outcomes. At the time of writing, Augur is at position #75 in the market and continues to be one of the DeFi’s best.

#10. Terra (LUNA)

Terra is a DeFi protocol that wants to expand everyone’s financial  inclusivity through its native token, LUNA. The Tetra team wants to “set money free” by building an open, global financial infrastructure. This infrastructure constitutes a family of stablecoins that allow users to earn mining rewards, giving people an incentive to participate in the network. Terra launched its mainnet in April 2019. It currently offers stablecoins pegged to the US dollar, South Korean Won, the Mongolian tugrik, and the IMF’s Special Drawing Rights basket of currencies. Users can trade LUNA as well as stake it and earn interest. LUNA token holders can also participate in the platform’s governance. After kicking off the year at $0.24, LUNA’s price nearly doubled around July before cooling down to around $0.33 in November. With its value proposition, Terra is set to be one of the most important DeFi presences in the future. 

Closing Thoughts

Ten years ago, the crypto space was talking about Bitcoin and decentralized currencies. Now, we’re talking of decentralizing the entire finance space. The above tokens represent some of the most exciting decentralized finance projects and their tokens in 2020. With a rapidly evolving DeFi space, you can expect anything in the coming year, but for now, these are among its biggest stars. 

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Cryptocurrencies

What’s Alpha Finance Lab (ALPHA)?

DeFi is the hottest topic in the crypto and blockchain space now, and the reason it’s so popular is the countless benefits it affords users. Financial instruments have been a preserve of the top few elites for too long, and DeFi is set to change that. As of now, we have multiple DeFi projects aiming for the top spot in terms of offerings, user experience, and more. 

DeFi is the hottest topic in the crypto and blockchain space now, and the reason it’s so popular is the countless benefits it affords users. Financial instruments have been a preserve of the top few elites for too long, and DeFi is set to change that. As of now, we have multiple DeFi projects aiming for the top spot in terms of offerings, user experience, and more. 

DeFi is the hottest topic in the crypto and blockchain space now, and the reason it’s so popular is the countless benefits it affords users. Financial instruments have been a preserve of the top few elites for too long, and DeFi is set to change that. As of now, we have multiple DeFi projects aiming for the top spot in terms of offerings, user experience, and more. 

Less than a year old, Alpha Finance Lab is one of many DeFi contenders emerging. The Alpha tram wants to empower people to “reclaim control over their digital presence.” So what does it offer potential users? We answer that question in this article. 

Breaking Down Alpha Finance Lab 

Alpha Finance Lab is a DeFi ecosystem that will integrate various products and bring users the experience of different blockchains, starting with Binance Smart Chain and Ethereum. The Alpha team wants to “drive cross-chain DeFi and cross-chain liquidity through building interoperability among Alpha products and integrating with leading ecosystem partners to drive the next stage of DeFi.” 

The Alpha team wants to achieve the following: 

  • Sustainable yield generation upon users’ depositing of supported assets
  • Eliminate or reduce the risk if impermanent loss (IL)
  • Facilitate privacy-oriented asset exchange
  • Support lending with already-provisioned interest rates 

Alpha: Existing Products 

The Alpha platform is building a mix of products that will be interoperable across Binance Chain and Ethereum and will support more blockchain platforms in the future. With that, let’s look at the platform’s current offerings: 

#1. Lending

Alpha supports lending through its Alpha Lending protocol. On the protocol, users can earn interest by depositing supported assets. Deposited assets will be transferred into a smart contract that will allow users to borrow money for trading. When borrowers pay back interest, it will be pooled and proportionately awarded to liquidity providers depending on their contribution. 

If you want to be a lender, they can deposit any of the supported tokens, e.g., Ethereum, into the protocol. After this, you’ll receive aITokens (such as aIETH), which are interest-generating tokens that will represent your share of the deposited ETH. 

#2. Borrowing

If you wish to borrow from the Alpha protocol, you first have to deposit supported assets as collateral. After that, you’ll receive aITokens. Assets eligible for collateralization have been assigned a Loan-to-Value (LTV) ratio. Let’s say the LTV for ETH is 70%. If you deposit ETH as collateral, you can borrow any asset in the pool and up to 70% of the value of the ETH you deposited. 

#3. Interest rate 

The interest rate will be determined by the asset’s utilization rate; in other words, the amount of deposited assets that have been borrowed. The bigger the utilization rate, the higher the interest rate. 

#4. Risk and Liquidation

Risk of liquidation is when the total value of the assets you borrow exceeds the maximum value you can take. Due to the volatility of cryptocurrencies, it’s recommended that you borrow at a lower value than the maximum value you can borrow. This will cushion you against the risk of liquidation. 

#5. Alpha Homora 

This is a protocol that allows users to leverage their position in liquidity mining pools. As a user, you can participate in the protocol as a yield farmer, lender, or liquidator. You can also participate by finding bugs in the protocol for which you’ll earn rewards. 

ALPHA Token 

ALPHA is the native cryptocurrency of the Alpha protocol, and it has the following current and planned roles: 

  • Liquidity mining: Users can earn ALPHA tokens for providing liquidity to the platform
  • Staking: Token holders can stake ALPHA tokens and get a share of the platform’s revenue
  • Governance: ALPHA token holders can participate in the governance of the platform by voting on project proposals

The Alpha token was distributed in the following manner: 

  • Binance launchpad sale tokens: 10%
  • Binance launchpool tokens: 5%
  • Private sale tokens: 13.33%
  • Liquidity mining tokens: 20%
  • Team and advisors’ tokens: 15%
  • Ecosystem tokens: 36.67%

Community Strategies of Alpha Finance Lab

The Alpha team intends to conduct several strategies to expand the growth of the project. 

These strategies include: 

  • Hosting and co-hosting DeFi conferences and related events to engage with potential users
  • Publishing blog posts every two weeks to update the community on technical updates
  • Engaging with the community via social media channels 

Future strategies include: 

  • Launching the Alpha Finance Lab Program to promote partnerships with similar projects
  • Launching yield farming programs 
  • Launching joint yield farming programs with other industry players

Key Metrics

The ALPHA token was trading at $0.034681 on October 16, 2020. It had a 24-hour volume of $2,489,546, an all-time high of $0.106884 (October 10, 2020), and an all-time low of $0.033573 (October 16, 2020) per Coinmarketcap. 

Where to Buy Alpha Tokens 

ALPHA has been listed on Coinone, Binance, and VCC Exchange. 

Closing Thoughts 

The Alpha team wants to push DeFi to the next level by focusing on cross-chain interoperability. Like many other DeFi protocols, Alpha provides an opportunity for people everywhere to make money by simply staking in crypto. The project is still young, so let’s see its future innovations. 

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Cryptocurrencies

Introducing Flamingo (FLM): A Beginner’s Guide

As DeFi becomes more and more of an indispensable idea, blockchain platforms are rushing to capitalize on the wave. DeFi provides endless opportunities for users: lucrative gains on staking, instant borrowing, fraud-proof transactions, and more. 

As DeFi becomes more and more of an indispensable idea, blockchain platforms are rushing to capitalize on the wave. DeFi provides endless opportunities for users: lucrative gains on staking, instant borrowing, fraud-proof transactions, and more. 

As DeFi becomes more and more of an indispensable idea, blockchain platforms are rushing to capitalize on the wave. DeFi provides endless opportunities for users: lucrative gains on staking, instant borrowing, fraud-proof transactions, and more. 

Blockchain platforms are now incorporating DeFi to not just accord users more value but also to remain relevant. Neo, the blockchain platform founded in China, is one of the latest to integrate DeFi in its offerings. 

Neo’s DeFi platform is known as Flamingo, and it stepped into the space just September this year. This article will bring into focus everything you need to know about the platform. 

Understanding Flamingo

Flamingo (flamingo.finance) is a decentralized finance protocol built atop the Neo blockchain. The platform integrates various modules to offer a comprehensive DeFi architecture, where users can take part as traders, stakers, borrowers, and liquidity providers. Flamingo is a pillar of the Neo DeFi’s ecosystem, and it comes with innovative solutions for the space such as the following:

#1. Friction and lack of cross-chain interoperability: Flamingo will be powered by the Poly Network to support cross-chain asset transfer, ensuring single market limitations are a thing of the past

#.2 Limited efficiency due to fragmented capital sources and overcollaterization: Flamingo will integrate the automated market maker (AMM) protocol and collateral asset pool, which will ensure capital is utilized to the maximum

#3. Short community participation periods: Flamingo will incentivize users with FLM tokens to reward them for their participation in the community

Project Features

The Flamingo platform will be guided by these three key elements: 

#1. Interoperability

Flamingo will heavily feature interoperability, a factor that lacks in most DeFi platforms. Through the Neo-owned interoperability protocol Poly Network, Flamingo will be collected with various blockchain networks such as Ethereum, Ontology, and Cosmos-SDK. Flamingo users can capitalize on this interoperability to access more assets within a broader DeFi ecosystem. 

#2. Capital Efficiency

Flamingo is designed to integrate its Swap feature’s liquidity pool with Vault’s collateral pool. In the existing AMM decentralized exchanges, capital efficiency is usually held back by Liquidity Provider (LP) tokens, which causes some AMMs to be provisioned way below the baseline. 

Flamingo will maximize capital efficiency by letting liquidity providers stake LP tokens in Vault while simultaneously minting Flamingo USD (FUSD).

#3. Fair Launch

Flamingo will distribute FLM tokens as transparently as possible, with no pre-mine launch or some reserved for the team. The community will decide the long-term distribution formula via voting.

Flamingo: Components

Flamingo is defined by several core features, which are: 

#1. Wrapper

This is a multi-chain asset gateway for blockchains such as Bitcoin, Ethereum, Neo, Ontology, and Cosmos-SDK. You can wrap tokens like BTC, ETH, NEO, USDT, and ONT , upon which they’ll become NEP-5 tokens (nETH, nNEO, nUSDT, nONT, and so on.) You can also unwrap tokens back to their original form. 

#2. Swap

Swap is Flamingo’s automated market maker and makes wrapped assets, FLM, and NEP-5 tokens. The swap works much like Uniswap by adopting the Constant Product Market Maker (CPMM) model. On Swap, users can exchange tokens or provide liquidity to a quality pool of their choice by simply depositing tokens. 

#3.Vault

This an asset manager by the Flamingo team. On Vault, users can stake in NEP-5 assets and get FLM token rewards. 

#5. FUSD

This is a synthetic stablecoin mintable by users. FUSD is pegged to the price of the US dollar. Users will be offered FLM that’s in proportion to the amount of FUSD minted. 

#6. Perp

This is an AMM-based contract exchange. Just like on Swap, traders can exchange perpetual contracts using the CPMM model, this time with a ten times average. Stakers need to deposit FUSD, upon which they’ll receive FLM as rewards. 

#7. DAO

DAO is a protocol for governance on the Flamingo platform. The Flamingo team intends for decision-making to be taken over by the community. Cabinet members can contribute to the platform using Flamingo Improvement Proposals and Flamingo Configuration Change Proposals. On the DAO, FLM token holders can vote on critical decisions such as increasing/decreasing tokens, software upgrades, parameter configurations, etc. Voters who contribute to governance are awarded FLM tokens. 

What’s Flamincome?

Flamincome is Flamingo’s dedicated platform for the new trend in DeFi, known as liquidity mining. Flamincome provides pretty much the same services as in Yearn.Finance (YFI). The tool features both an optimizer and normalizer. An optimizer increases yield by converting original assets (USD, USDC, DAI, ETH, wBTC, wETH, etc) to interest-focused assets (fUSDT, fUSDC, fDAI, fwETH, fwBTC, etc). 

A normalizer changes back interest-bearing assets into original assets. Interest-bearing assets such as fUSDT, fUSDC, fDAI, fwETH, fwBTC, etc are changed into synthetic assets (nUSDT, nUSDC, nDAI, nwETH, nwBTC, etc). This conversion takes place on a 1:1 peg ratio to the underlying asset. The synthetic assets can be used in other DeFi platforms for more yield farming. 

Is Flamingo Audited?

Yes, the Flamingo platform is audited. Several independent auditing outfits have audited various stacks of the platform: 

  1. Normalizer contracts on Flamincome: PeckShield and Red4Sec
  2. Flamingo contracts: PeckShield
  3. Poly Network: Certik 
  4. Poly Network Neo contracts: PeckShield
What are the Risks of Interacting with the Flamingo Platform? 

While Flamingo is thoroughly audited, mistakes/bugs are bound to occur. While there’s no inherent risk in Vault’s staking process, using the Swap module can set you up for impermanent loss (IL). 

However, as Neo founder Da Hongfei noted, this risk is often overestimated: “Only by providing liquidity to Swap may you bear IL. After all, IL is not as terrible as many people think. To provide liquidity to a trading pair A/B, after a period of time if the price of A has fallen by 50% relative to B. How much do you estimate the impermanent loss to be? The answer is 5.72%. This means you would only lose 5.72% by providing liquidity compared to holding A/B in your wallet. That’s not as bad as most people’s intuition.”

How is the Flamingo Platform Secured? 

The Flamingo network is NEP-5-compliant. NEP-5 is Neo’s token compatibility standard, which means Flamingo is secured by the underlying Neo blockchain. Neo itself is secured by SHA-256 (the hash algorithm that secures Bitcoin) and RIPEMD-160 hash function. 

Community Growth Strategies of Flamingo

The Flamingo team intends to implement several strategies to expand the growth of the community. These strategies include the following: 

  • Conducting physical marketing events and meetups
  • Engaging with users via social media platforms
  • Conducting online Ask Me Anything (AMA) to engage with current and potential users 

Future Strategies include: 

  • Conducting daily weekly progress updates
  • Kicking off the Developer Grant program 
  • Initiating voting functionalities for the Flamingo decentralized autonomous organization (DAO)

Future of Flamingo

Flamingo wants to be the stepping stone for the acceleration of DeFi in the Neo ecosystem. The Neo team doesn’t plan to stop at Flamingo but intends to launch other products like lending, insurance, and asset management products. 

For now, the team is exploring ways to introduce more asset types, decide which oracle implementation to integrate, and examine how the governance mechanism will function in the future. The Flamingo team encourages input from the community. Users can submit proposals on how to optimize the platform and build a more robust protocol.

The FLM Token

The FLM token is the native token of Flamingo. Holders of the platform can participate in decision-making for things like new tokens issuance, platform parameters, etc.

Other uses include: 

  • Staking multi-chain assets 
  • Staking LP tokens, minting FUSD
  • Depositing FUSD to trade in perpetual contracts

The Flamingo token was distributed in the following fashion: 

  • Binance Launchpool tokens: 4.17%
  • Mint Rush tokens: 29.17%
  • LP Token Staking: 53.33%
  • FUSD Minting: 10%
  • Perp Margin Rewards: 3.33%

Flamingo: Key Metrics

The FLM token price was $0.254369 while ranking at #3587 on October 16, 2020. The token’s 24-hour volume was $7,296,347, with a total supply of 150 million. FLM had an all-time high of $0.307385 (Oct 9, 2020) while it’s all-time low was $0.249290 (Oct 11, 2020). 

Buying and Storing FLM

The FLM token is listed as a market pair of USDT, BTC, BNB, USDT, BUSD, NEO, and PERP in exchanges such as Binance, OKEx, MXC, HotBit, Binance, BitZ, LBank, Hubi, Switcheo Network, VCC Exchange, and FTX. 

FLM tokens can be stored in NeoLine (Chrome Extension), O3 desktop wallet (supports Ledger), MetaMask Chrome Extension, Cyano Chrome Extension, and ONTO mobile wallet. 

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Crypto Guides

An Introductory Guide To ‘Yield Farming’ In The World of Cryptocurrencies

Introduction

Introduction

Introduction

Lately, the topic of Decentralized Finance or DeFi in the cryptocurrency space has been the most talked-about concept among crypto enthusiasts. While the general populous has been hunkering down on the economic uncertainty, people in the field of cryptocurrency have been excited about decentralized finance’s one of the latest, riskiest, and dynamic investment strategies – Yield Farming.

The concept is quite new, even for the crypto nerds. But it has the potential to change the dynamics of how people deal with cryptocurrencies. Some people may confuse it with liquidity farming, but Yield Farming is a different concept. Simply put, it is the process of finding the best returns (yields) that the cryptocurrency world has to offer.

One of the great things about Decentralised Finance is that they are permissionless. That is, anyone with an internet connection and a supported crypto wallet can interact with them, even a smart contract. This has given rise to Yield Farming. So, what is it? How does it work? Who can use it? We will answer all these questions and more in this post. Keep on reading.

What is Yield Farming?

Yield Farming is a process of generating rewards with crypto holdings using permissionless liquidity protocols. Simply put, Yield Farming means holding and locking cryptocurrencies and getting rewards. According to experts, Yield Farming bears a resemblance to staking. Nevertheless, it is a lot more sophisticated than you can think. In most cases, Yield Farming works with users known as liquidity providers (LP) who add capital to liquidity pools.

A liquidity pool is a smart contract containing funds; when liquidity providers provide liquidity to the pool, they get a reward. The reward received by the liquidity provider will be either generated from the fees of the underlying Decentralized Finance platform or some other sources. In some cases, liquidity pools use multiple tokens to pay their rewards. These tokens can be deposited to other liquidity pools to earn more rewards. This means that as a liquidity provider, you will contribute to the liquidity pools and earn rewards in return.

Yield Farming is done using Ethereum (ERC-20 tokens), and the reward generated is also some kind of ERC-20 token. Yield farmers move their funds quite often between different protocols, looking for higher yields. Experts believe that Decentralized Finance platforms may provide providers with other economic incentives to attract more capital.

How Does it Work?

Yield Farming is based on the Automated Marker Maker (AMM) principle that includes liquidity pools and liquidity providers. Suppose you are a liquidity provider. You deposit funds into a liquidity pool. This liquidity pool of yours is a whole marketplace where users can exchange, borrow, or lend tokens. As the user uses these tokens, they will have to pay a certain fee to the liquidity provider, that is, to you. This is how AMM works.

Conclusion

As simple as it sounds, Yield Farming is a complex phenomenon. The strategies involved are highly complex and are suitable for only advanced users. Also, experts suggest that it should be deployed by those who have a lot of capital.

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Crypto Videos

Earn Passive Income With Yield Farming Part 2!

https://youtu.be/Petl4xCznaw

https://youtu.be/Petl4xCznaw

 

Earn Passive Income With Yield Farming – Part 2/2


While the previous part of our yield farming series talked about the definition, threats and opportunities of DeFi yield farming, this part will talk more about specific projects and what they offer, as well as how to choose the right project for you.

Compound and Aave

Compound and Aave are currently DeFi’s primary lending and borrowing protocols. These two platforms together account for over $1.1 billion of lending and $390 million of borrowing. The easiest and most straightforwards way of earning a return in DeFi is lending capital on the money market.

Aave generally has better rates than Compound, as it offers its borrowers the ability to choose a stable interest rate rather than a variable rate. The stable rate is, in most cases, higher for borrowers than the variable rate, therefore increasing the marginal return to lenders.

On the other hand, Compound introduced a new incentive for its users through the issuance of its COMP native token. Anyone that lends or borrows on the Compound platform earns a certain amount of COMP, translating into more rewards.

Security from Financial Risk

DeFi money markets work by employing over-collateralization, meaning that a borrower must deposit assets that have more value than their loan. When the collateralization ratio (which is the value of collateral divided by the value of the loan) falls below a threshold, the collateral is liquidated and instantly repaid to lenders.

Yield Farming Liquidity Pools

Uniswap and Balancer are the two largest liquidity pools in DeFi. They offer liquidity providers a reward in the form of fees for adding their assets to a pool. Liquidity pools are between two assets that are configured in a 50-50 ratio in Uniswap, while Balancer allows for up to 8 assets in a single liquidity pool.
Whenever someone takes a trade through the liquidity pool, liquidity providers who contribute to that pool earn a small fee to facilitate the transaction. Uniswap pools have offered liquidity providers healthy returns over the past year as decentralized exchange volumes picked up. However, optimizing profits requires investors to also consider impermanent loss, the loss created by providing liquidity for an asset that suddenly appreciates.
Balancer pools are somewhat mitigating impermanent loss, as pools don’t need to be configured as a 50-50 split between two assets. They can be set up in a 90-10 or 80-20 allocation to minimize impermanent loss. However, the risk cannot be completely eliminated.

However, there is a liquidity pool that completely eliminates impermanent loss. Curve Finance facilitates trading between assets that are pegged to the same value. As an example, there is a Curve pool with USDC, USDT, DAI, and sUSD: all stablecoins pegged to the USD. There’s also a liquidity pool that consists of sBTC, RenBTC, and wBTC: all pegged to Bitcoin’s price. As all of the assets are worth the same amount, there is no impermanent loss. On the other hand, trading volumes of those pools will almost always be lower than the regular liquidity pools like Uniswap and Balancer.

Incentive Schemes

The Synthetix project first introduced an sETH-ETH pool as the original incentives scheme, offering liquidity providers an added incentive of SNX rewards. While this pool has deprecated, this idea expanded to other liquidity pools.
Taking advantage of these incentives can show to be incredibly lucrative. However, investors should ensure that they aren’t earning a dud token, but rather something that holds value. Nobody wants to take part in an incentive scheme that gives rewards in tokens equivalent to BitConnect tokens.

What to Choose

For the slightly risk-averse investors who just want to earn a yield on their stablecoins, there are many options, with money markets or providing liquidity on projects such as Curve Finance being the best option for lower-risk interest. For those with large cryptocurrency holdings and want to use them to earn even more, liquidity pools such as Uniswap or Balancer are certainly a good choice. Added incentives on top of the regular rewards are just icing on the cake.

That being said, the perfect yield farm is different for each individual varies based on their amount of capital, the investment time horizon, as well as how risk-averse they are.

Categories
Crypto Videos

Earn Passive Income With Yield Farming!

 

 

 

Earn Passive Income With Yield Farming – Part 1/2

The hottest buzzword in crypto at the moment is surely “yield farming.” Yield farming allows people to earn fixed or variable interest simply by investing crypto in a DeFi project. As an example, investing in ETH is NOT yield farming, but lending out ETH on the Aave platform for a return IS yield farming. As the newest trend in crypto, investors are still a bit skeptical as they do not understand what it is and how it works.

Yield Farming – Explained

Yield farming is the practice of staking cryptocurrencies in return for monetary gain. While the expectation of earning a yield based on investments is nothing new, the concept of yield farming has arisen directly from the decentralized finance sector. The idea is that individuals can earn tokens in exchange for participating in DeFi applications. Yield farming is often called liquidity mining.

How It All Works

The precise mechanics of yield farming vary based on the terms and features of the individual DeFi application. Most projects started out by offering users a small share of the transaction fees in exchange for contributing liquidity. However, the most common yield farming method at the moment is to use a DeFi application and earn the project token as a reward.

This practice became popular during the summer of 2020 when Compound announced that it would start issuing its COMP governance token to both lenders and borrowers who use the Compound application. This was extremely well accepted, pushing Compound to the top of the DeFi rankings.
Since then, several projects created DeFi applications with associated governance or native tokens and started rewarding users with their tokens.
The most successful yield farmers try to maximize their returns by deploying more complicated strategies. These advanced strategies usually consist of staking tokens in a chain of protocols, intending to generate maximum yield.

Pros/Cons of yield farming

The benefit of yield farming is apparent immediately, and that is profit. Yield farmers who adopted a new project early have the privilege of benefiting from token rewards that can quickly appreciate in value. If they choose to sell those tokens at the right time, they can make significant gains.
Yield farmers generally have to invest a large sum of initial capital in order to generate any significant profits, with even hundreds of thousands of dollars being at stake. Due to the volatile nature of cryptocurrencies and especially DeFi tokens, yield farmers are exposed to the risk of liquidation, which occurs in case their project is plummeting in price. On top of that, the most successful yield farming strategies are extremely complex, meaning that the risk is higher if you don’t know all the yield farming space’s ins and outs.
Another risk of being a part of the DeFi and yield farming space is that the projects you invest in may have bugs that can crash the whole system, therefore rendering your funds non-existent. There have been several examples of such things happening, with the most prominent one being bZx, which suffered a series of hacks due to a single misplaced line of code.

Challenges and Opportunities

Almost every single DeFi application is currently based on the Ethereum blockchain, which creates two problems. The less important one is that, as Andreas Antonopoulos says, is that if projects support only Ethereum-based cryptocurrencies, they are slightly centralized in that manner. However, this is not as important as the next challenge, which is the overload of the Ethereum network. The network is currently struggling with a lack of scalability as it did not anticipate DeFi and its rapid expansion. As yield farming becomes more popular, Ethereum will get clogged up with more transactions, leading to slower confirmation times and skyrocketing transaction fees.

However, with new scaling propositions and alternative DeFi platforms, these problems aren’t fatal to DeFi, and the practice of yield farming could end up being around for quite some time.
Check out the next part of our DeFi passive income guide to learn how certain projects do business, how to earn passive income with them, as well as which project is the right for you.

Categories
Cryptocurrencies

YEarn DeFi Ultimate Review: Everything you should know in 2020 & Beyond

yEarn is a liquidity aggregator that offers automated yield farming through several lending pools. Yearn.finance is one of the most popular yield farming protocols, and it shifts between top DeFi lending protocols like dYdX, Aave, and Compound. 

yEarn is a liquidity aggregator that offers automated yield farming through several lending pools. Yearn.finance is one of the most popular yield farming protocols, and it shifts between top DeFi lending protocols like dYdX, Aave, and Compound. 

yEarn is a liquidity aggregator that offers automated yield farming through several lending pools. Yearn.finance is one of the most popular yield farming protocols, and it shifts between top DeFi lending protocols like dYdX, Aave, and Compound. 

yEarn has also created Y and BUSD pools,  two lending pools on the DeFi platform Curve that consists of top stablecoins such as the USDT, TUSD, USDC, and DAI. 

yEarn has a native token called YFI, that is earned through liquidity money on different pools. YFI is earned by staking liquidity proof. YFI is one of the DeFi tokens launched with no pre-mine and no initial DEX offering.

yEarn Background

Andre Cronje founded yEarn in February 2020. However, yEarn didn’t raise any funds since Andre revealed that he developed the software by himself. Andre is famous in the DeFi community for ‘testing in prod.’ Meaning that almost all his contracts are directly pushed to the mainnet without any formal audits. Andre is always open to losing some money to his smart contract and openly stating that individuals should not bother using the software regarding particular yEarn portions. Andre has managed to control virtually every protocol aspect over the community, including minting new YFI and governance. However, it’s the yEarn community that determines the yEarn protocol.

How yEarn Finance Works

yEarn Finance works in a rather complex way, perhaps because of the protocol’s lack of proper documentation. In reality, however,  yEarn .finance’s protocol is easy to comprehend.

As we have already mentioned, yEarn.finance does move the stable coin funds between dYdX, Aave, and Compound based on the stablecoin pool asset generating a higher APY. Currently, yEarn.finance supports TUSD, SUSD, USDDC, DAI, and USDT. yEarn.finance is itself governed by the community, which will decide the lender protocols it supports and the cryptocurrencies that will be supported over time.

When one deposits stablecoins here, they’ll be converted into equivalent amounts of ytokens. For example, DAI will be converted to Ydai. These can help in YFI tokens earning.

However, yEarn.finance the initial protocol deposits, shuffling them automatically between the dYdX, Compound, and Aave pools with higher yields. Such a protocol will also take a very tiny cut that will be deposited to the yEarn.finance pool. Such can only be accessed by holders of YFI tokens.

There is also the Iborrow.finance that involves tokenizing the debit in other protocols with Aave’s help to ensure it is used in different DeFi protocols. However, only yswap.exchange and yEarn.finance were available at the time of writing this piece.

How You Can Earn YFI Cryptocurrency

Before looking at the three different ways you can begin earning YFI, let us first look at what’s happening behind closed doors. You can send the ytokens Curve Finance’s Ypool, DeFi protocols allowing the trade between low slippage stable coins.

The Curve Finance incentives mining liquidity helps it offers one a return of yCurve tokens generated to provide liquidity for Curve Finance protocols.

Cronje created YFI tokens to allow its users to trade the yCurve using their funds accumulated in the yCurve pool in place of governance of yEarn .finance’s ecosystem.

The first method to earn involves depositing the yCurve to yEarn .finance’s yGov pool.

The second method involves making a 98% to 2% YFI and DAI deposit to the yGov pool into Balancer protocol and exchanging with BAL tokens. After that, balancer protocol tokens are deposited into the yGov for YFI.

The last method involves making a deposit of yCurve and YFI mixture into the balancer, exchanging them for BPT tokens that will be deposited into the accurate YFI tokens and yGov. YFI was designed in a manner that all the three pools would be having at least ten thousand YFI tokens for grabs. 

yEarn.finance Governance

YFI tokens are used for governance in the yEarn ecosystem. One YFI token equals a single vote.

yEarn.finance ecosystem proposals only works when 33% of token holders reach the same agreement. If they meet this condition, then we can conclude that over 25% of the token holders are against the proposal. However, if approved, over 50% of the YFI holders have to vote in support of the proposal to be implemented. 

However, only the YFI holders to vote are the ones with BPT tokens in the yGov pool. It is the reason why Cronje calls this system of governance meta governance. The process involves holding YFI tokens and exposing yourself to high vulnerability and risk by having all the assets held by close to six DeFi protocols that come together with the yield.finance.

yEarn.finance – The Roadmap

Since the yEarn .finance’s protocol has been in existence for a couple of months while that the governance has currently (when writing this) existed a month. There isn’t much we can talk about concerning the roadmap. During our interview with Andre Cronje, he did reveal that DeFi protocol development like yEarn.finance is a type of a manic episode having almost all the protocol groundwork being created within a couple of weeks.

Andre made the YFI token for the purpose of ushering in a whole new community governance era that isn’t principle-based. Since Cronje and other key developers were never interested in managing the ecosystem, the YIPs are not the driving force for the ecosystem development since the introduction of community governance.

Most recently, the YIP attempt to increase YFI token supply cap didn’t attain a 33% vote, which led to YFI token forking into the other token known as YFI. The YFI token is not responsible for any role in yEarn.finance governance, but it is one thing that the entire community would vote on to change soon.

Conclusion

Since the yEarn.finance future is a bit fuzzy. It offers what is considered to be the first real experiment in decentralized finance that the world has ever encountered. With the possibility that the DeFi protocols we encounter today might not be available tomorrow, yEarn.finance, as an ecosystem of lending pools, will always be marked as a watershed moment in the DeFi space for many and lots of great reasons. DeFi proponents hope that yEarn.finance will be around for many years.

Categories
Crypto Daily Topic Cryptocurrencies

What’s Yield Farming?

The newest and hottest DeFi trend in town is ‘yield farming.’ And no, it has nothing to do with rain and crops and granaries. Instead, ‘DeFiers’, or DeFi fans, have latched onto the metaphor to describe interest or ‘yield’ that’s achieved when they put to use crypto assets such as Dai, USDC, and USDT into DeFi platforms such as Compound. 

The newest and hottest DeFi trend in town is ‘yield farming.’ And no, it has nothing to do with rain and crops and granaries. Instead, ‘DeFiers’, or DeFi fans, have latched onto the metaphor to describe interest or ‘yield’ that’s achieved when they put to use crypto assets such as Dai, USDC, and USDT into DeFi platforms such as Compound. 

The newest and hottest DeFi trend in town is ‘yield farming.’ And no, it has nothing to do with rain and crops and granaries. Instead, ‘DeFiers’, or DeFi fans, have latched onto the metaphor to describe interest or ‘yield’ that’s achieved when they put to use crypto assets such as Dai, USDC, and USDT into DeFi platforms such as Compound. 

The DeFi scene had already exploded in 2020 before yield farming became the next big thing. But in June, things went notches higher after DeFi platform Compound started distributing its governance token, COMP, just this June. In other words, Compound started rewarding users with the COMP token. The platform has taken on a near-celebrity credential in the DeFi world, thanks to the distribution. Hordes of investors and traders have flocked to the network to “farm” COMP. 

So, how does yield farming work? Let’s demystify this trend as we explore any risks that you need to look out for. 

How Yield Farming Works

At its core, yield farming, a.ka liquidity harvesting, is when you lend cryptocurrency, such as USDC or Tether, using a platform such as Compound. Compound will, in return, lend the funds to borrowers who want to use them for speculating in the market. Interest rates will vary with market movements as well as demand. However, just by participating in the Compound platform, you start to earn COMP tokens and interest. Other miscellaneous fees may also make part of the final equation. If the COMP tokens increase in value, your returns will also see a massive jump. 

What kind of cryptocurrencies are involved? 

Currently, Compound, only launched in June, is the biggest such service. Other major coins include Balancer, Ren, Curve, and Synthetix. Synthetix is the one that came up with the idea. As we speak, these projects have $1 billion in user funds locked up for lending. Most of the users are speculators seeking to earn triple-digit returns.

What are the Risks? 

Well, for one, theft. The crypto scams and frauds you hear about are not far off just because this is a new type of investment. Remember, the funds you lend out are stored in software. And hackers always seem to have a knack of discovering new ways of compromising even the most seemingly foolproof code and stealing funds. 

There’s also the risk of deposited coins losing value – a phenomenon that could cause the entire system to crash and burn. Moreover, there’s the whale effect. This is when investors with significant holdings go short, a move that could potentially shake the market. 

On the whale point, still, there’s concern that they could manipulate prices. If a whale lends to a platform like Compound and then borrows the money back, it effectively creates artificial demand for the currency, creating inflation. Traders with modest holdings need to know that yield farming “has become a game for whales who are capturing the vast majority of rewards,” as pointed out by crypto research firm Messari. 

Why is Yield Farming Suddenly Hot? 

The reason is twofold. Amid the Covid-19 pandemic, cryptocurrencies, generally viewed as independent of system controls, have witnessed a surge of interest as Fiat currencies experience volatility due to overall economic uncertainties. There’s also the fact that these yield-harvesting products only just recently debuted, and are backed by high-profile entities like Andreessen Horowitz and Polychain. 

What’s the Future of Yield Farming?

Jesse Walden, the founder of venture fund Variant, has said that while yield farming can promote growth for the sector right now, for it to succeed in the long-term, users have to have a reason to continue staying in the platforms. 

“Yield hacking in DeFi is a short-term incentive to drive user growth, but the bigger game is the long-term wealth creation that comes from building (and owning!) a piece of the products and services that billions of people will use every day.” 

Yield Farming Tips

Here’s how the most successful yield farmers are getting, well, profitable harvests. 

A DeFi investor by the name Degen Spartan says the strategy of investing stablecoins in the sUSD Curve pool and depositing  LinkPool tokens on the Synthetix forum has yielded him an Annual Percentage Yield (APY) of 20%  since he started investing this way in 2019. Spartan thinks that the increased investor interest in COMP  has allowed the less explored investing strategies to thrive, increasing the overall yield in the DeFi space.

CoinFund founder and managing director Jake Brukhman believes there’s a lot of potential in the niche. He says he has witnessed APYs of anything from a few points to several hundred points, but that this hinges a lot on what assets you hold and your risk tolerance. Brukhman believes this success is a result of either the overzealousness of these protocols (some are offering capital at incredibly low rates) or inefficiencies in their systems (still a young niche). 

Another investor going by the name SNX Professor recommends monitoring your trades daily, and only switch between lending protocols only when it makes sense. This is because yield farming, like any type of investment, takes time. Remember, you’ve invested in things such as transaction and slippage fees. As such, it’s better to wait it out in one platform until your investment can truly yield results. 

And lastly, 1kx founding partner Lasse Clausen believes investing in these up and coming protocols is way more promising than investing in platforms that are already highly valued.

Closing ThoughtsYield farming is disrupting the DeFi scene and capturing the attention of investors and traders. For fear of missing out (FOMO), it’s easy to jump in the bandwagon rather blindly. However, this new type of crypto investing might be flashy and promising, but that doesn’t mean you should throw caution to the wind. Take highly measured steps and don’t put in more money than you’re willing to lose.