If even famous crypto Youtubers said "what is this yield farming craziness? it is just putting your tokens and get a new token with fancy food names, the only reason they have value is because people speculates into them and when it ends then it will go back down", then what would regular people who even still doubts the future of Bitcoin thinks? This is a homework for everyone in DeFi farming if we want crops with sustainable value in the future. For those of you who are new to DeFi or yield farming, let us return to few prerequisite information before diving into the discussion.
Does The Current DeFi Guarantees Full Ownership?
What is Yield Farming
- If you have Ethereum, you can just transfer them to a web3 wallet. If not, then start from the beginning in how to obtain Ethereum and learn how to use decentralized exchange and DEFI.
- Go to their website, and click the trade menu to get some Statera (STA), also get wETH. (gas fee occurs)
- Go back to their website, scroll down, click the button stating providing liquidity for Statera (STA) in uniswap, and provide liquidity by locking equal amount of Statera (STA). (gas fee occurs)
- To see the delta token contract address, just paste your wallet address in any Ethereum explorer.
- Go back to their website, scroll down, click the button stating providing liquidity phoenix fund on Balancer.
- Connect wallet, click provide liquidity, create proxy, and activate necessary assets. (high first time gas fee occurs)
- Choose either single asset or all pool assets to deposit the delta token. (very high gas fee!)
- If you choose all pool assets, you also need wBTC, SNX, and LINK
- Finally you will get a Phoenix Fund token which can potentially give you returns. (another gas fees for harvesting?)
If you think that process is complicated, then know that is actually still categorized as a very easy strategy. High yield DeFi farming can be more complicated. With the current gas fee system and demand, many people claimed that DeFi farming will only profitable when investing above $1000. Below that is not recommended except for just wanting to try. Before proceeding to the next section, here are todays famous farming platforms based on https://academy.binance.com/en/articles/what-is-yield-farming-in-decentralized-finance-defi:
Customers needs to borrow tokens, Compound Finance requires suppliers and that could be us, we lend liquidity and Compound Finance rewards us in COMP tokens. Today, compound is one of the core protocol of yield farming ecosystem.
We lock assets as collateral to maintain the DAI token stable to one dollar.
Similar to MakerDAO, we lock assets as collateral to issue tokens of anything that has price feed for example commodities, equities, and forex.
Another lending and borrowing protocol but famous for its flash loans. Lenders get “aTokens” in return for their funds.
The most popular decentralized exchange (DEX) today using automated market maker (AAM). Supplier provides liquidity by locking their assets for customers to exchange tokens. Other than receiving commissions, suppliers receives UNI tokens
Curve Finance is a decentralized exchange protocol specifically designed for efficient stablecoin swaps.
Like Uniswap liquidity provider but allows custom allocations while Uniswap allocations are only 50/50 for each exchange pair. Suppliers receives BAL token.
Yearn.finance is a decentralized ecosystem of aggregators for lending services such as Aave, Compound, and others. It aims to optimize token lending by algorithmically finding the most profitable lending services.
Enter Harvest Finance
The Crops Utility
- The most popular and easiest utility is as a governance token to have voting rights and determine the future of the platform.
- Sharing profit by buy backs and burns.
- Further yield farming.
I did not hear any other utilities, if any of you know more, please mention them in the comment section. However, I know other utilities for other crypto coins:
- Service discount as on most centralized exchanges.
- Digital product payments such as decentralized blog posting, file storage, video storage, and virtual private networks (VPN)s.
- Digital product subscriptions such as holding tokens for premium content access.
- Tokenized physical assets.
- Tokenized traditional investments.
- Rewarding quality contents, activities, and other things.
- The default utilities which are value transfer, asset ownerships, and payments.
Leave a comment for not only other utilities you know but also future utilities ideas. This is the homework for yield providers.
As for Harvest Finance and other similiar platforms, the current strategy is to find the highest yield in price and/or quantity. There is an open room in developing strategies for determining other crop qualities. For example other than taking the utilities into account, a strategy can also be based on chain analysis such as number of holding address and amount of transactions, and another one is sentiment analysis. This way, we can also find undervalued crops. I am sure that most people preferred farming crops in increasing trend rather than crops in high volatility and/or decreasing trend. However, is it worth developing this feature now? I am not sure, because I am not sure with the crops utilities itself where the yield providers must provide value first but stashing this idea and take it into consideration in the future may proof advantageous.