The Decentralized Finance (DeFi) Thread

kel

Ostrich
Is there any reason to stake on Ethereum rather than Polygon? I'm staking for SUSHI and the LINK-WETH pair returns ~16% on MATIC and ~10% on ETH because of extra MATIC rewards on the network.

Are there major risks with MATIC that I'm not aware of that cause the interest to be higher?
Where do you get those returns, and what else can you get your return in besides SUSHI?
 
Where do you get those returns, and what else can you get your return in besides SUSHI?


I have the most familiarity with SUSHI which is why I use it. Its my favorite DEX now that Uniswap seems to be moving in a more centralized. I like that part of the liquidity it provides goes to SUSHI holders, not just to the liquidity providers.

You can check on returns by going to the "farm" section. https://app.sushi.com/farm

1628508898455.png

There's $109,973,130 of liquidity locked in the protocol and 2877 sushi rewarded per day so you would need to provide ~38k in liquidity to earn 1 sushi per day. 1 sushi is worth 9.83. 9.83*365 = 3587.95/38000 = 9.4% so thats where you get the APR from.

You need to
1) Provide liquidity of a pairing say wETH-LINK. In exchange for liquidity you will receive LPs or liquidity protocol tokens.
2) Stake your LPs in the farm section.
3) Harvest the sushi that you are given as a reward every so often and convert into another crypto if you want to stay away from SUSHI or Stake the sushi in the Kashi bar.

Just remember that each transaction costs $$$ so to find a time when fees are smaller or transact on a chain that has lower fees.
 

Coja Petrus Uscan

Crow
Orthodox Inquirer
Gold Member
I have the most familiarity with SUSHI which is why I use it. Its my favorite DEX now that Uniswap seems to be moving in a more centralized. I like that part of the liquidity it provides goes to SUSHI holders, not just to the liquidity providers.

You can check on returns by going to the "farm" section. https://app.sushi.com/farm

View attachment 32697

There's $109,973,130 of liquidity locked in the protocol and 2877 sushi rewarded per day so you would need to provide ~38k in liquidity to earn 1 sushi per day. 1 sushi is worth 9.83. 9.83*365 = 3587.95/38000 = 9.4% so thats where you get the APR from.


Is that 9.4% just from the SUSHI reward? Isn't there trading fees on top of that?

On LiquidityFolio it appers to be related to the top one, though I think that is a different pool -

Screenshot at 2021-08-09 17-58-54.png

N.B. most of the projected returns are negative to to impermenant loss, which is like DeFi's scaling issue. Half of the pools will leave you in the negative.

I don't use ETH for any DeFi now.

But one of the reasons why DeFi on BSC and other chains it taking off more is they pump the yields up with large amounts of rewards. Though the trading fees tend to be better. The rewards are so high on BSC (and with farming the are recycled into the pool pair, e.g. for a LINK-BNB pool you might get a CAKE reward that is recycled back into LINK-BNB. No doubt this will lead to one of the biggest melt-downs we've ever seen when winter comes.

To add to the previous post, some brief overviews of platforms:

CURVE - has the second highest TVL. It is a base USD and top coin lending platform that provides very small, but real rates based on trading fees, which are supplemented with their reward/governance token. The token has considerably under-performed the platform.

PancakeSwap (PCS) - briefly had the highest TLV, but was pancaked heavily in the May crash, but is now covering nicely. Built on BSC it has got everything right to induce people onto it, including very high distributions of reward tokens. This is my main exchange and a lot of funds are on here, but I don't use the farming directly, as it's better to use yield farms (risk) to autocompound.

Uniswap - regarded as the gold standard, but with no rewards and higher fees you have to choose pools carefully as you are more likely to loose rather than gain.

Yearn - a good yield aggregation for ETH, but has been hacked at least once. It's returns are real. Has been hacked at least once.

Balancer - specialises in pools that are not 50:50 of the pooled assets. It was highly anticipated, but didn't gain much traction. Has low volume compared to what is locked in it.

Synthetix - is an absolute mess and also low volume compared to funds locked. It has an overly complicated schematic, which led me burning about $500 just to try and get out. Look at Mirror if you are interested in sythns.

Alpaca - is considered very secure and the team is very good. This is a leveraged trading platform. I used four of the pools, but the result was typically no loss or gain. Two had very large gains after initially using them, but they disappeared. Has good rates on lending single assets.

Autofarm - avoid it due to them not wanting to discuss the millions they lost and after a good initial approach to the problem of their own making, they have ignored the topic and carried on as if nothing had happened. They also have a 0.5% deposit free, which I don't think anyone else has. So if you are in a pool with a low yield than it could take considerable time just to break even.

Bunny - once had $10B TVL, but was hit by a flash-loan attack (not a hack) which destroyed the price of their reward token, which has not recovered. I still like this one, though the team is anonymous, but has been the best at dealing with any issues on the platform. I am having a shot at BUNNY rebounding. It was at about $450, now at about $15. PCS is hotting up, so expect it to spread to the ecosystem.

Belt - very good yields on multi-asset pools, but don't know exactly where that yield comes from.

Badger - was heralded as a major innovation in getting yield from BTC, but it tanked, though it now having a resurgence. Bad interface and high fees.

Raydium - is the main place I would look to enter for newcomers. It is the main exchange on Solana, which has a very astute team with financial literacy, which is generally missing elsewhere. The Solana ecosystem is brimming at a rate exceeding BSC and with better projects and people. Solana is also a very fast (400ms blocks) and low fees. All TXs cost about 1/50th of a cent, i.e. 50 TXs will cost about $0.01. As a result full order book DEXs have been built on Solana, of which Raydium is the best and most popular. Its price has tanked massively since May, which I see as one of the best buying opportunities. Though I see the real time for Solana and its ecosystem to be ~2025. It's weak point is it's lack of farming opportunities and poor integration with hardware wallets. A lot of coins are now on Solana, so hopefully this will change. The rates on their farms: SOL-RAY, SRM-RAY, ETH-RAY are very nice.

Beefy - is a under-rated multi chain farm that farms pretty much anything on the chain. It is my go-to place for smaller coins like BLZ, BTT, BAT. Regarded as having good security and relied on their work rather than a ponzi reward token. Their token it one I will be picking up later as I think this project has sticking power.

Kyber - was the first DEX I used in early 2020. It has been around since 2017, but despite being the first mover it has been sidelined by UNI, BSC and others. I think it is irreievant.

Harvest - the first yield aggregator I used in Oct 2020. It's a good aggregator that explains where the yields come from well. But was a bit jerky when I used it.

Acryptos - a highly underrated project with a good selection of farms with good, well-explained yields. Said to be very secure, audited by multiple companies.

SpookySwap and SpiritSwap - two DEXs on Fantom. I don't think they have legs as they are just poor PCS rips, the Fantom chain doesn't offer anything in particular that you can't get elsewhere and they don't have enough fire-power.

1Inch - A good place to find the lowest exchange price, but looks like it's pooling is failing.

The only ones I am looking at holding post-winter are Beefy, Raydium and maybe CAKE. I believe the game here it squeezing yourself more coins out of the novelty. I liken this to mining in the early days. If you can get in on the insane yields now, things will settle down later and you could be holding lots of HQ digital assets. In four years the players with longevity will have whittled out the chaff and honed their platforms, as well as stabalised yields.

The tokens of most DeFi platform don't perform that well. Many have a rally and then slump. Betting on any small DeFi token is a big gamble. There are two ways to make large gains with them: 1) get in early with a project that will rally and dump; 2) try and bet on the dominate platform on a chain.

There are only a few high-performing ones:

UNI (ETH) - DEX
CAKE (BSC) - DEX/farm
AAVE (ETH, MATIC) - lending
COMP (ETH) - lending
THOR (cross-chain) - DEX
SUSHI (ETH) - DEX
1Inch (ETH, BSC, MATIC) - DEX/farm
SNX (ETH) - synthetic assets
YEARN (ETH) - farm
MDEX (HECO,BSC,ETH) - DEX/farm

Farms have struggled to retain the value of their tokens. You can see their is a favour for the primary exchange of the chain and then the primary lending platform.
 
Is that 9.4% just from the SUSHI reward? Isn't there trading fees on top of that?
There are liquidity fees on top of that. From the whitepaper (?):

The value of the SLP tokens, which represent the shares of the total liquidity each pool, is updated with each trade to add their value relative to the tokens the pool uses to trade. If previously there were 100 SLP tokens representing 100 ETH and 100 SUSHI, each token would be worth 1 ETH & 1 SUSHI (note in this example, ETH and SUSHI are the same relative value). If a user were then to trade 10 ETH for 10 SUSHI in that pool, and another user were to trade 10 SUSHI for 10 ETH, then there would now be 100.025 ETH and 100.025 SUSHI. This means each LP token would be worth 1.0025 ETH and 1.00025 SUSHI now when it is withdrawn.
I like sushi because you can farm on the same platform and if you're on the ETH network you can go right into staking your reward or SUSHI for xSUSHI which is where the other 0.05% fee for trading goes.
 

Coja Petrus Uscan

Crow
Orthodox Inquirer
Gold Member
Raydium has finally been listed on Binance

Screenshot-at-2021-08-10-16-02-02.png


Fairly sure that will be one of the best buys from this slump. I picked up some 3X long.
 

fiasco360

Kingfisher
Orthodox
Good news for me at least considering I've been holding onto a small bag of RAY since the downturn.

I'm 2x long on FTT.

Will be 2x on SOL/RAY as well soon.
 

Coja Petrus Uscan

Crow
Orthodox Inquirer
Gold Member
On Binance? How exactly do you do that

There is or was margin trading on Binance. But I use FTX. You can segregate multiple accounts for margin trading.

My brother and I have sold almost 15 NFTs this week on open sea, if anyone knows how to promote these things you can dm me.

Is your current procedure just uploading them? I paid about $60 to upload one to Rarible and assume no one has ever seen it.

I would guess to ramp up you'd want to get social media channels and embed yourself into the space.

Orca has just released pools with heavy token rewards. I assume it will be a short-term offering:


The SolFarm token was down to about $1M market cap a week or so ago. It's 6X'd from them. With a TVL of about $160M, was a good opportunity.

Update on SolFarm leveraged yield farming.

I have been in for several days.

RAY-SRM - down 5%, despite both going up in price
ALEPH-USDC - up about 25%, price up about 5%
 

Mikeyd03

Woodpecker
Coja,

I use open sea and just had to pay the gas fees to open the collection. It's been pretty crazy.....we have been charging a high amount for the art, but it's only been a week and through some giveaways we have a couple hundred followers now. Excited to see where this goes.
 

scorpion

Hummingbird
Gold Member
Can anyone explain where this yield is coming from? How are these DeFi tokens supposedly generating all of this revenue that allows them to earn APY% of 20-100% or more?

This is pretty clearly a Ponzi scheme. All of these returns are fake. They exist on paper only, and DeFi token holders are encouraged to continuously roll their "profits" over into new trading positions rather than cash them out for USD. The few who do cash out (always after great difficulty - they intentionally make it as inconvenient as possible) are being paid with dollars from others who are freshly buying in. This entire house of cards is going to collapse at some point, and all of this 'wealth" is going to evaporate into thin air. You can try to claim the same about the stock market, but the stock market at least represents companies that undertake real economic activity. There is none of that going on here. DeFi and crypto in general is a scam aimed at financially illiterate Zoomers and Millennials ("Come and join the dual yield pool party!"), tricking them into exchanging their dollars for literally worthless bits of computer code that represent nothing. A small number of token originators and insiders will be walking away rich, everyone else will be left holding the bag.
 

Coja Petrus Uscan

Crow
Orthodox Inquirer
Gold Member
Can anyone explain where this yield is coming from? How are these DeFi tokens supposedly generating all of this revenue that allows them to earn APY% of 20-100% or more?

This is explained in the thread, but briefly -

1) some DeFi yields are 100% derived from fees on trading/economic activity
2) some DeFi yields are partially delivered from from fees on trading/economic activity and partially printed out of thin air
3) some DeFi offerings are just printed out of thin air

As examples of one:

There is a projected 27.4% yield on USDC on SolFarm. This 100% comes from interest paid by people who want to borrow USDC for margin positions.

I have been lending USD/stablecoins in the cypto space since 2015, for people to make margin positions from. In the case of the exchange Bitfinex, when the borrower gets into a position they can't pay it back from, they are liquidated and you are made whole. I would guess, roughly, that this has earned an average of 12-16% per year and maybe as much as 40% in 2017, all from a real stream of economic activity and minus the exchange's 15% cut. In DeFi that cut is ~0-0.5%. In January 2018 I made about 10% purely from lending for margin positions.

You could also stake BNB in a Binance Smart Chain validator for 15-17% APR, which is taken from exchange fees.

As examples of two:

*from above*

screenshot-at-2021-08-04-18-19-47-png.32549


The swap daily is approx. how much of your deposit you will earn from trading fees from the CAKE-BUSD pool on PCS. The APY is how much you will get a year (projection). The vault refers to rewards in CAKE, which is recycled back into the CAKE-BUSD pool. The farm refers to rewards in Acryptos' ACS token, the yield of which is variably controlled by them, hence the range.

So the swap is real. It can be equated to the fees a centralised exchange (CEX) would make facilitating trades on their platform. Instead you get it with DeFi and a small amount goes to the decentralised exchange (DEX), e.g. PCS, Uniswap. The vault is inflated, mania yield. It will probably still find a way to exist when DeFi comes to reality, but the fees will be more like 1% on the vault and farm. There are some farms, like Beefy, which don't offer a reward token, though they do liquidate reward tokens into the pooled assets.

As an example of three:

You can stake CAKE for around 100% APY. It is just distribution of new coins. Or you can stake Cardano for a share of new coins at about 5% APR.


Scorpion: This is pretty clearly a Ponzi scheme.

Yes. There are ten results for my posts with the words [crypto] + [ponzi] going back to 2018. But the mechanics of any new innovation is liable to look like a ponzi. Most of that innovation will end up essentially being a ponzi, while some of it will end up being backed by real economic activity.

As mentioned there are many cFi and DeFi offerings that are already 100% backed by either lending or sharing in trading fees. On top of that I believe there will be projects that will mature and end up being backed by real economic activity, like the 2000 bubble in Amazon stock was later justified, while the bubble in Pets.com stock was not.

At the point these projects mature, they can no longer offer unrealistic yields. As mentioned above, I see these early year 1-2 DeFi yields as being in the same vein as 2011 Bitcoin mining. You could say to the 2011 Bitcoin miner that it's a ponzi scheme, but 10 years later he has a ~500,000%+ return on the price of mining; and now 1% of his mined coins are sitting on corporate balance sheets of companies trying to navigate the slow end of the dollar.

You are right that there will be losers. But so far the losers in the crypto-space are those that haven't bought in. If you are economically literate it should be easier to pick solid projects, over FOMO bagginz.

Scorpion: but the stock market at least represents companies that undertake real economic activity.

Yes, but with many zombies and grossly over-valued. Plenty have come and gone, in which case their mechanics have looked like ponzis. The same can be said of venture capital. Most are valued at millions, but end up being worth < 0. The general model for new companies is now Charles Ponzi.

I agree that the crypto space is virtually entirely economically illiterate and there is very little real economic activity underpinning its valuation, which is now pushing back to $2.1 trillion. However, Paul Krugman said the same about eCommerce back in the 90s. The scientific consensus was manned flight was impossible in the 1890s...

You can see the utilisation and the possibility to make gains by guessing what it will be, as you would do if you were now betting on 3D printing stocks, junior miners, AI, bio-tech etc.

Right now Goldman Sachs, NASDAQ etc. are creaming trillions off of a private-government cartel that owns the financial infrastructure. Only they can make yield by lending (including margin lending), or on managing funds, providing any financial service. With DeFi, almost all of the yield is accrued by people sitting at home. The platform makes very small amounts. Crypto is in the early stages of replacing the entire financial system and other legacy industries. In a crypto future, your stock trades would be out of pools owned by any investors, executed on a platform with no owners and essentially no way to turn it off.

There are also numerous countries that want to save and make billions by cutting fat, legacy middle-men out of the economy and replacing them with blockchain. The UAE's 10 year plan starts with the word 'blockchain'.

There is also the growing spectre, particularly for US persons, of being financially unpersoned. Nick Fuentes has had close to $500,000 removed from his account by Hunter Biden's dad with no explanation; Gab were banned from most of the financial system and happened to have made 10s of millions on the appreciation of Bitcoin donations in the dollar's wake :squintlol:; Roosh is banned from parts of the banking system and the general economy. As discussed before, I came close to losing most of my fiat life savings, because they are turning the international banking system into a complete command and control prison system with expiring money and bank accounts which have an on/off switch housed in the ADL headquarters. Many people around the world who live in countries with high capital controls are getting into crypto, because they all know the effects of a prison economy all too well. Trying to control those flows has worked about as well as the $50,000 remittance rule that the Chinese wealthy have somehow got around to buy up Sydney, Vancouver, London, Brussels...

From the head of The European Central Bank

screenshot-at-2021-08-13-14-03-18-png.32778


A few years ago she wouldn't have written "the safest form of money", implying there is more than one form of money. The more I see what they are up to, the more apparent their system is finished. But the end probably won't be pretty.
 
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scorpion

Hummingbird
Gold Member
So from what I understand based on my reading, and from what you've laid out here, the returns from DeFi are generated by lending your coins to other people through the use of smart contracts. These smart contracts typically require the borrower to already have sufficient funds "in escrow" (so to speak) to cover any losses and automatically make the lender whole. That being said, what possible use can there be for this type of lending except to add fuel to speculative crypto trading? This is a zero sum game. You're robbing Peter to pay Paul. This type of lending does nothing to spur actual economic activity, it simply provides additional liquidity to crypto gamblers.

Crypto faces a sort of catch-22 situation: the more it evolves to become practical, secure and useful for facilitating actual economic activity, the more governments and central banks will seek to control it. And with that centralized control will come an end to any illusions that crypto will provide a refuge dissidents can utilize to escape the banking system, as well the end to outsized returns. The irony is that if crypto does succeed to the degree you predict then it will become just another tool for elite control of the financial system. The idea that crypto cannot be killed and/or captured is hilariously naïve, especially in a post-COVID world where we've witnessed the power of governments to completely trample the civil liberties of their populations. You think that the same people who can convince over half the population to take experimental injections and wear masks all day can't also enforce simple currency controls? How exactly are people going to buy into their crypto positions if/when it becomes illegal to exchange every major currency for coins? What is the value of a coin that cannot be exchanged for any real world good or service? Zero.

Crypto is being sold as the new internet, but I think it's actually more like the new electric car: a technology that is relentlessly promoted as inevitable, superior and ethical compared to its predecessor, but which in practice actually fails to achieve much of anything new, and certainly can't live up to its hyped potential to completely change the world.
 
So from what I understand based on my reading, and from what you've laid out here, the returns from DeFi are generated by lending your coins to other people through the use of smart contracts. These smart contracts typically require the borrower to already have sufficient funds "in escrow" (so to speak) to cover any losses and automatically make the lender whole. That being said, what possible use can there be for this type of lending except to add fuel to speculative crypto trading? This is a zero sum game. You're robbing Peter to pay Paul. This type of lending does nothing to spur actual economic activity, it simply provides additional liquidity to crypto gamblers.

Crypto faces a sort of catch-22 situation: the more it evolves to become practical, secure and useful for facilitating actual economic activity, the more governments and central banks will seek to control it. And with that centralized control will come an end to any illusions that crypto will provide a refuge dissidents can utilize to escape the banking system, as well the end to outsized returns. The irony is that if crypto does succeed to the degree you predict then it will become just another tool for elite control of the financial system. The idea that crypto cannot be killed and/or captured is hilariously naïve, especially in a post-COVID world where we've witnessed the power of governments to completely trample the civil liberties of their populations. You think that the same people who can convince over half the population to take experimental injections and wear masks all day can't also enforce simple currency controls? How exactly are people going to buy into their crypto positions if/when it becomes illegal to exchange every major currency for coins? What is the value of a coin that cannot be exchanged for any real world good or service? Zero.

Crypto is being sold as the new internet, but I think it's actually more like the new electric car: a technology that is relentlessly promoted as inevitable, superior and ethical compared to its predecessor, but which in practice actually fails to achieve much of anything new, and certainly can't live up to its hyped potential to completely change the world.

The crazy returns are either scams OR from honest people trying to bootstrap projects into relevance and capture market share/total value locked. Its really hard to tell the difference.

DeFi is tech investing on steroids. The issue with tech investing is that people have wild expectation of disruption which fuels speculation and incredibly overpriced assets. Best example of this other than crypto is of course the tech boom in the 90s. While most of the value in that boom was illusory some was not. For every hundred pets.com we also got a google. Buried in the hundreds of DeFi projects are the next generation of FAANG companies, but you don't have to be an accredited investor to buy them now, they are available to anyone.

DeFi has the ability to disrupt Wall Street. Much of Wall street are insiders who are heavily subsidized (primary dealers collecting spreads on treasuries, fees on tax advantaged or government owned savings vehicles, regulatory exclusion of competitors etc) and kick back profits to the US government for political power. This is not true of defi. So where does the value in DeFi come from? Banks function as middle men CAN be replaced by smart contracts and the value they derive from being middle men CAN flow into DeFi. Will it, I don't know but DeFI is a ~10 billion dollar industry, global banking is a 10 trillion dollar industry so I've allocated small amounts of savings in case capital flows from one to another. Its an asymmetrical bet than either goes to 0 or goes 1000x over the next decade.

As for crypto being taken over by elites, our current elites are taking positions. BUT they cannot force out the people who already own it. They can and are manipulating the price, shaking out people with leverage. They can push FUD driving down the price to places they are more comfortable buying. They can create new protocols and buy up cheap older protocols. But I don't believe they can kill it. There's a lot of people who have made a lot of $$$ on crypto who will throw their weight around the moment regulation becomes too onerous.

If you spent any sort of $$$ buying prior to 2011 (and held) you're a deca millionaire. 2014 your a millionaire. Prior to 2017 you've made hundreds of thousand of dollars. Prior to 2020 you have tens to hundreds of thousands of dollars. This has created a new class of people who have money to throw and won't be easily displaced.
 
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