Yield Farming Brings Passive Income to Crypto
The DeFi world is increasingly becoming multichain.
Gas fees on the Ethereum network make it prohibitively expensive to use for smaller scale users. Those looking to participate in decentralized finance are forced to look to other networks to gain yield.
Luckily, there are now several other competing networks available outside of Ethereum in order to yield farm. Many of them provide faster and cheaper transactions, the trade off being less guaranteed security. Nonetheless they are viable options.
Best of all the networks provide substantial incentives on liquidity mining to those yield farmers willing to bear the risk and move capital into these newer ecosystems.
Total Value Locked in crypto Top 5
Presently, a few of the best opportunities available for yield farmers on three of said ecosystems with the most growth are Avalanche, Solana, and Terra.
While these are not the only opportunities that presently exist, these are the ones that provide the best risk reward ratio and in my eyes are the most attractive as of now.
As always, do your own research!
1) Avalanche (AVAX) DeFi Opportunities
Avalanche’s ecosystem have experienced tremendous growth this past year.
This network has seen total value locked explode from $72 million to $11.8 billion this year alone in 2021.
This explosive increase in the price of the AVAX token has provided several high-yield opportunities for clever farmers looking to bridge over to take advantage of these low cost and fast transactions on the network. The gas fees range from about $0.50-$2.00
Avalanche’s TVL and Top 5
The onboarding process to Avalanche is straightforward,simply add the network to your wallet, then bridge the funds from Ethereum onto Avalanche using a bridge.
- Guide on how to add Avalanche to your MetaMask, click here
- To bridge between Ethereum and Avalanche, click here
Avalanche Farm #1: BenQi
- Yield Profile: 2-12% APY
BenQi is presently on top for this network’s money market services, boasting 1.6 billion dollars in TVL. Benqi currently has a $3 million liquidity mining program that incentives borrowers and lenders to partake in order to earn AVAX and QI rewards.
Benqi’s protocol allows deposits and borrows for AVAX, wETH, wBTC, LINK, stablecoins DAI, USDC, and USDT.
The deposit side of the yield ranges from roughly 2% to 10% depending on the asset used. The yield is made up of both the interest on the asset and reward tokens.
On the borrower’s side of the equation borrowing can pay a net APY anywhere from 0.25% to just under 7%. Meaning were being paid to borrow, unlocking the potential for various strategies.
Take for instance wrapped BTC (wBTC), a holder can deposit these tokens to earn 3.7% APY. Then turn around and use the deposited wBTC as collateral to borrow and earn 5.3% APY on that debt outstanding.
Allowing users to generate investment returns on their tokens and mitigating liquidation risk of the collateral as the debt’s value will line up with that of the collateral deposited.
Avalanche Farm #2: Trader Joe
- Yield Profile: 20-85% APY
Trader Joe is presently the second largest DEX on Avalanche with a TVL of $2 billion right under AAVE. The protocol is currently incentivizing over 20 different token pairings allowing liquidity providers to stake their LP tokens to earn JOE rewards.
Those who are more risk off that do not want exposure to potential impermanence loss can enter stablecoin pool pairings such as USDT/DAI and USDC/DAI
For instance, risk-averse farmers who do not want price or impermanent loss exposure can enter the USDC/DAI and USDT/DAI pools to earn respectable yields currently of roughly 20%
Those who anticipate the market will be less volatile and willing to take on some risk can earn basically APRs starting in the 20%-30% range and increasing from there.
Options such as AVAX/USDC, JOE/USDC, and AVAX/DAI pools.
Additional Yield Opportunity
- JOE Staking APR—26% APR —Stake JOE to receive 0.05% of every swap in the form of xJOE tokens.
2) Solana (SOL) DeFi Opportunities
Solana is a chain that’s emerged strongly onto the scene in the past year.
Bolstered by a meteoric price rise in SOL, new protocols coming onto the network, a burgeoning NFT community, and the chain’s Phantom Wallet Solana has seen it’s TVL rise to over $10 billion in a year.
Solana’s use case is in it’s low sub $0.01 transaction fees and fast movement. There are several places for burgeoning yield farmers to park capital and put their stacks to work.
Solana’s Total Value Locked
Solana’s chain, the process for onboarding to Solana is similar to that of Avalanche.
Unlike Ethereum and many other Chains that are compatible on MetaMask, you’ll instead have to grab a new web wallet. To onboard SOL we can either go via a centralized exchange (CEX), or bridge another chain’s tokens such as Wormhole Here’s a list of Solana web wallets here (Phantom Wallet seems to be the most recommended right now, like how Meta Mask is for ETH and others)
Not to be confused with Fantom Opera FTM (another chain, haha)
For access to Wormhole bridge of Ethereum and Solana ( click here )
Solana Farm #1: Raydium
- Yield Profile: 15%-100+% APY
Raydium, the largest on Solana, boasts over $1.5 billion in value currently with daily volumes north of $90 million dollars. Raydium’s unique value proposition is that it acts as a liquidity provider to Serum, a Solana central limit order book (CLOB DEX)
This lets traders access liquidity in either protocol for the lowest slippage rates on trades, and Liquidity Providers can up their returns with Serum volumes.
There are two types of opportunities on Raydium:
“Raydium Farms” for LPs on pairings of RAY-SRM, RAY-ETH, RAY-SOL, and RAY stablecoin pairings, RAY-USDC, RAY-USDT these can be staked to earn rewards paid in RAY, that go with a 0.22% fee on every swap.
The yields on these are quite lucrative currently ranging between 55%-100+% APY depending on the pairing.
Raydium also offers “Fusion Pools,” which are incentivized trading pairs of various projects in the Solana ecosystem.
There are now over 50 Fusion Pools, with many featured prominent protocols available. These pools currently yield from the low single to mid three digit APRs. So between 7%-500% depending on the token. These as with LPs of tokens not stablecoins come with the risk of impermanence loss of course.
Bonus Yield Opportunity
- RAY Staking—18% APR—Stake RAY to earn fees of each trade made on the platform in more RAY reward farm tokens.
Solana Farm #2: Marinade
- Yield Profile: 7-65% APY
Marinade is a decentralized exchange that’s optimized for staking. It also allows for the standard Liquidity Pooling features. Boasting a $1.4 billion dollar TVL as the second largest Solana DEX it’s a force to be reckoned with.
It’s main value is it’s ease of use for staking as the best way to stay liquid in Solana staking. The yield for staking is roughly 6-7%, still healthy and respectable.
The LP side of Marinade offers over 15 different pairings as for now allowing farmers to supply liquidity between pairings on SOL based projects or borrow also. Paying out daily rewards in various farm tokens.
3) Terra DeFi Opportunities
Terra is another smart contract ecosystem that has also experienced rapid growth this past year. Bolstered by the price rise in LUNA, the adoption the network’s stablecoin UST, and strong product-market- compatibility of it’s apps, Terra is now home to crypto’s second largest DeFi ecosystem, surpassing BSC Binance smart chain the previous second largest smart contract network, at the time of this writing.
With over $18 billion in value locked, the chain places behind only Ethereum, the current king of smart contracts. Terra has fewer applications on it’s network than other ecosystems, but what it lacks in raw number of apps it makes up for in ease of use, durability, and recognition of the chain’s protocols.
Terra’s Total Value Locked
As with the other mentioned networks the onboarding process is a similarly straightforward process. Users looking to onboard will need their network’s specific wallet like in Solana. It’s easy just download a Terra compatible wallet then bridge funds over from Ethereum or another network.
- Here’s a list of different Terra wallets here
- Here’s the bridge that allows your to move between Ethereum, Terra, and Binance Smart Chain, click here
Terra Farm #1: Anchor
- ROI estimate: 19+% APY
Anchor is the leading stablecoin money market on Terra, with more than $8.4 billion of total value locked. Anchor protocol harnesses a unique design which pays a fixed rate of interest to UST depositors and enables staking derivatives as collateral to borrow said UST.
This is a process known as bonding, done through the protocol’s UI borrowers have the ability to use their LUNA to mint an equal amount of bLUNA, that can then be used as collateral within Anchor (with a 21 day unbond waiting period just a heads up!).
Additionally, Anchor also supports bETH, a wrapped Terra version of Lido’s staking derivative, stETH, that can be deployed as collateral in the protocol.
For a even more in depth guide as to how Anchor and the mechanisms of generating fixed yield see here
Anchor can serve several different purposes for those hunting for yield.
The most straightforward lower risk strategy is locking a fixed rate of 19% (right now) on their UST stablecoin. This is a much higher rate of interest offered than other players in the space.
The next strategy that a farmer can employ is using deposited bLUNA or bETH as collateral, borrow UST, and then redeposit UST into the protocol. This is a higher risk strategy than the previous one as you have the possibility of being liquidated on your position.
The benefit to the yield farmer through this is being able to earn a 12% yield on their deposit and also a 19% yield to the outstanding borrowers.
With the underlying risk of liquidation this allows borrowers the ability to earn a APR of 12% which comes from a 38% yield of ANC rewards and a borrow APR of 25%. The current yield being paid to depositors of stablecoin UST is at 19%.
Terra Farm #2: Mirror
- ROI estimate: 25%-100% APY
Mirror is a top application on Terra that also hosts profitable opportunities. Mirror protocol allows for the minting and trading of synthetic assets. These are assets that replicate and track an equivalent asset it’s based on, for instance market indexes or stocks such as Apple, Amazon, AMD, Tesla, Microsoft, The Nasdaq, and the SP500. They are designated with an m prefix next to the ticker symbol of the underlying asset it seeks to mirror.
Currently boasting over $1 billion in value, users deposit UST in and can choose roughly 30 assets to hold on their platform.
There exist two types of farming solutions for Mirror users.
Long farms, users provide liquidity to mAsset pairings and in exchange earn trading fees along with MIR rewards tokens also. The yields span from 13% APR on synthetic cryptos like mBTC or mDOT and go up to 24% APR on stocks like mAMZN, a synthetic Microsoft stock with a few other higher APRs.
Short farms, users with UST, aUST (UST deposited within Anchor), LUNA, or another synthetic asset as collateral to mint another mAsset into a sLP token. Their sLP token is auto staked by the protocol to reward holders in MIR tokens. As of now yields on short farms range from as low as 0.13% APR on mSPY up to 23% APR on mSQ, mCOIN, and mHOOD.
At the End of the Day – Closing Thoughts
DeFi with it’s smart contract capability was brought onto the scene through Ethereum initially. As the landscape continues to evolve we’re now at the point where it’s evident that there are now many competing networks that facilitate DeFi.
These new competing chains and ecosystems have served to bolster the growth of the market. This surge in capital is powering the further development of these new economies built around crypto.
We are still early, big picture. There are tremendous growth opportunities in these emerging chains. If you identify them correctly and play them right you will be mightily rewarded.
Using DeFi chains outside of Ethereum allows for farmers with lower capital stacks to get into DeFi without high gas fees that currently are part of Ethereum. Transactions are fast and cheap on non-ETH chains.
Ethereum’s Layer 2 ecosystem is around the corner. This will allow users to gain the same fast and inexpensive transactions as well as combined Ethereum’s security. Look at these developments in due time.
With all these new protocols and developments the clear winner of all these developments will be users getting powerful Decentralized Finance tools at their disposal.
- DYOR for yield farming between various chains and exchanges
- Download major wallets for each chain, here’s a: