DeFi Pulse Farmer #33
Catch up on a new week in DeFi as we recap the Farm of the Week, the Conservative Farmer, the Governance Watcher, and more!
Welcome to DeFi Pulse Farmer - your guide to staying up on the latest and best trends in yield farming and beyond.
In this newsletter, we break down top stories, developments, and trends from the past week in tandem with two key farming opportunities to keep an eye on.
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DeFi proved steady in recent days, with the ecosystem’s total value locked (TVL) rising slightly from $44.55B to $44.88B on the week.
Not bad — again, this isn’t far from the space’s all-time high TVL of $45B, which was notched for the first time ever around this time last month.
The round psychological milestone of $50B remains within reach, then, but if the last week’s any indication it’s clear things can stay sideways a while before the next big move up or down. Nothing’s a given in DeFi, and most certainly not timing!
Zooming in, rounding out the largest projects currently are DeFi’s three lending giants, Maker ($7.16B TVL), Compound ($6.83B TVL), and Aave ($5.2B TVL). Then a big bit of intrigue came last Sunday when trading protocol SushiSwap overtook the TVL of its progenitor Uniswap for the first time, $4.52B to $4.33B as things stand.
Yet will that lead stand in the near future as Uniswap V3 is seemingly closer than ever? Only time will tell, but everyone in DeFi’s certainly watching.
As for headlines, we had a few big ones this week:
There’s a new proposal gaining traction in the Ethereum dev community to prioritize the Eth2 merge — i.e. the completion of Ethereum’s migration to PoS — after the coming London hard fork. That would put Ethereum on pace to go full PoS as early as Oct. 2021!
Index Coop and DeFi Pulse introduced the Flexible Leverage Index or FLI. The unprecedented token lets traders easily “target leveraged exposure in a decentralized manner.” The first FLI available is the ETH 2x FLI, which offers one-click exposure to a 2x leveraged ETH position.
A new report from Bank of America noted that DeFi and Ethereum were poised to be more disruptive to mainstream finance than Bitcoin and that mainstream institutions could avoid being disintermediated by “grasping these opportunities.” Wow!
Then lastly, let’s review some of the best-performing DeFi tokens this week per usual. The biggest movers were ALCX (+79%), BAL (+44%), CRV (+38%), HEGIC (+33%), DDX (+31%), and KEEP (+25%). In the same span, we saw the DeFi Pulse Index (DPI) go slightly down to $460.5.
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Farm up to 336% in the xToken Cafe
We explored the xToken protocol at the beginning of March in an Alpha Tractor issue. We’re bringing the project back as our latest Farm of the Week contender because its DeFi pastures remain plenty bountiful!
So for anyone who’s missed out on xToken so far or needs a refresher, here’s the 101. Participating in the nascent DeFi scene can be hard. There’s many inefficient and costly activities right now, like manually staking and providing liquidity. So xToken’s just arrived to help.
How? The xToken protocol provides an ERC-20 staking system for simplifying DeFi. In short, the project offers wrapped versions of popular DeFi tokens like KNC, SNX, and AAVE so users can just easily buy a single “set-and-forget” ERC-20 that automatically handles liquidity and governance affairs via batching deposits. It’s DeFi made easy!
Most of these wrapped xTokens currently have two versions, e.g. xAAVEa and xAAVEb, to choose from. The distinction is that the “A” tokens will automatically vote more conservatively in Aave governance affairs (or KNC governance affairs, etc.), while the “B” tokens will vote more aggressively.
So what about these xToken Cafe farms, then? Here, the name of the game is farming the xToken governance token, XTK. And to do that, you’ll have to acquire some xTokens, provide liquidity for them, and then stake your ensuing LP tokens through the xToken Cafe dashboard.
You can pick up whichever xTokens you want at the xToken Market. Here, if you’re wanting xKNCa, you can buy some in ETH or KNC, or if you’re wanting x1INCHb, you can buy some with ETH or 1INCH, and so forth. Alternatively, there are xToken markets on 1inch, Balancer, and Uniswap, too.
As for which farms to target, that’s really just up to your personal token preferences. But it’s worth noting that the best-performing xToken farm right now is xINCHa, which is fetching 336% APR currently, while the floor opportunity is xSNXa’s 119% APR.
Once you’ve got your initial allocation of xTokens ready, you can follow the steps below to join:
Navigate to your desired token in the xToken Cafe.
Click on the presented “Add Liquidity” button, at which point you’ll be taken to a liquidity pool dashboard on 1inch, Balancer, or Uniswap (depending on which token you’ve chosen).
Heads up: Balancer supports single-token LPs, so if your associated xToken is underpinned by a Balancer pool then you’ll only need those xTokens at a minimum to jump in. For other xTokens, like xKNCa or x1INCHa, you’ll need an equivalent amount of ETH to LP on Uniswap and 1inch.
Confirm your liquidity deposit through the liquidity dashboard, and then take your new LP tokens back to the xToken Cafe. Click on the “Stake” button.
Confirm the stake transaction, and once that’s done you’ll be farming XTK!
Just keep in mind that you have to completely exit your staking position whenever you want to claim your XTK. Also, it’s important to note that XTK rewards are escrowed for 6 weeks, so these farms aren’t necessarily for short-term harvesters. Other than that, xToken’s certainly interesting, and it’s been audited. In DeFi never throw caution to the wind, though. Do your own research, and only farm responsibly if and when you do.
Aave AMM Market Released
TLDR: The Aave team introduces an AMM market, wherein users can use their LP tokens, e.g. from Uniswap, as collateral in the Aave Protocol.
Introducing the 1inch Aggregation Protocol v3
TLDR: The 1inch.exchange team unveils the details of its v3 system, which is focused on providing its traders with lower gas fees.
TLDR: The Gnosis Safe project rolls out SafeSnap, a suite of governance tools for use within the Gnosis Safe app.
Fuse by Rari Capital is live
TLDR: Robo-advisor project Rari Capital releases its Fuse protocol, which centers around isolated interest rate markets.
DeFiance Capital Joins Bancor Protocol as Strategic Advisor
TLDR: The Bancor Protocol AMM project welcomes DeFiance Capital into its ranks as a new strategic advisor. The firm purchased an allocation of BNT as part of the deal.
Farm 6.8% to 11% APY via BarnBridge SMART Yield
The newly launched BarnBridge SMART Yield system is really smart, so there’s certainly some conservative alpha here for your consideration. Let’s explore how the system works and then how you can join if you’re looking for safer yield pastures lately.
First things first, remember that BarnBridge is DeFi’s first tokenized risk protocol. It gives traders ways to use derivatives to hedge against DeFi yields and prices.
The SMART Yield system, then, is BarnBridge’s latest product. It mitigates the risks of DeFi interest rate volatility via debt-based derivatives. Specifically, SMART Yield works by tranching yields from DeFi debt pools, e.g. Compound’s or Yearn’s.
These tranches are split into junior tranches, i.e. riskier ERC-20 tokens known as jTokens, and senior tranches, i.e. less-riskier ERC-721 NFTs known as sBONDs.
How it all works is that junior token holders provide liquidity along with the value that senior bondholders lock within their sBONDs. The liquidity is invested around DeFi accordingly. Both parties profit when the ecosystem’s APYs are high enough, but if they ever sink low enough, senior bondholders are guaranteed returns at the expense of juniors.
As you can see in the picture above, then, the first USDC sBOND holders are currently enjoying nearly 7% APY, while USDC jToken holders are notching over 11% APY right now.
If you’re interested in joining either of these farms, you’ll need to:
Navigate to the SMART Yield dashboard.
Click on the “Deposit” button on the right side of the USDC panel. You’ll be taken to the Tranche page, where you can select from the junior or senior tranche options. Click the tranche you want, and then press “Next Step.”
Click on the “Enable token” button and approve the SMART Yield contract with a transaction. Then choose how much USDC you want to deposit and click on the “Deposit” button.
Once your deposit is confirmed, you’ll receive your jTokens or sBONDs and will start raking in yield.
BarnBridge has taken audits seriously, so the SMART Yield system should be on the safer side of things as far as DeFi goes. Just remember to never farm with more than you can afford to lose, no matter how safe any project seems.
Today’s Plow of the week goes to DeepDAO, a very cool tool that allows you to explore, rank, and analyze DAOs. Jump in and explore DAOs AUM, number of members, token holders, and more!
There’s really no telling if DeFi’s about to burst through a $50B TVL, continue its recent sideways chop, or start to acutely draw down. That’s just being fair. At the same time, the possibilities and opportunities in this ecosystem are as wide open as ever. That’s why we farm. These are our pastures, they’re promising, and we’re making the most of them. We just have to keep doing so smartly!
All info in this newsletter is purely educational and should only be used to inform your own research. We're not offering investment advice, endorsement of any project or approach, or promise of any outcome. This is prepared using public information and couldn't possibly account for anyone's specific goals or financial situation. Be careful and keep up the honest work!