Editorial Notes (vol. 12) – The hunt for real yield and stablecoin strategies to weather the storm
It’s been a fun couple of weeks focusing on NFTs during and after the NFT NYC conference. Now, it’s time to put our DeFi hats back on.
In today’s edition, we’ll be looking at two features that can be found on our Explore Screen – the first, The Hunt for Real Yield, was inspired by Jack Niewold’s thread on Twitter, where we’ll be looking at a few projects that are distributing their generated revenues to the token holders and stakers, but not through the dilution of their supply rather in “real” assets such as ETH and USDC. Our second feature, Stablecoin Strategies to Whether the Storm, will focus on projects building products that allow for yield generation on stables and ways to generate the yield, be it through lending, partaking in delta-neutral strategies, and more.
Let’s dive right in! ⚡
The Hunt For Real Yield
Many projects have different schemes to incentivize people to hold and stake their governance tokens. The problem is the fact that most projects do that through distributing their native tokens and in the process diluting the supply through inflation. Here, we’ll look at some projects rewarding stakeholders with assets such as USDC, ETH, AVAX, and SOL. They do this solely through the distribution of the protocol's generated revenue.
Trade top cryptocurrencies on GMX with up to 30x leverage directly from your wallet.
GMX is a decentralized spot and perpetual exchange that supports low swap fees and zero price impact trades. Trading is supported by a unique multi-asset pool that earns liquidity providers fees from market making, swap fees, and leverage trading. 30% of fees generated from swaps and leverage trading are converted to ETH or AVAX and distributed to staked GMX and GLP tokens
Access sustainable, hedged yields on Arbitrum with UMAMI.
Umami is building an ecosystem of strategy vaults for the future of finance. Umami’s expanding menu of strategy vaults offers sustainable, risk-hedged passive income sourced from across DeFi. In the center of their ecosystem is the native UMAMI token, which can be staked for a growing stream of passive income generated by the yield from Umami's Protocol Owned Liquidity and fee revenue from its vaults.
The revenue they distribute to UMAMI stakers is not derived from the dilution of their supply. They generate revenue through earning yield on their Protocol Owned Liquidity and distribute the rewards to sakers in WETH. In the near future, they’ll also be launching delta-neutral USDC vaults which will provide the UMAMI holders with even higher rewards.
Trade NFTs on LooksRare, stake native LOOKS, and farm wETH.
LooksRare is the community-first NFT marketplace that actively rewards traders, collectors, and creators for participating. Users that buy or sell NFTs from eligible collections earn LOOKS tokens and 100% of trading fees are earned by LOOKS stakers. Creators get royalty payments at the moment of sale. LooksRare generates revenue by charging a flat fee on all trades that happen on their platform. The revenues fluctuate in accordance with the trading volume and it pays out the rewards to its token holders in ETH.
Access automated options strategies with Ribbon to earn sustainable yield.
Ribbon uses financial engineering to create structured products that deliver sustainable yield. Ribbon's first product focuses on yield through automated options strategies. The protocol also allows developers to create arbitrary structured products by combining various DeFi derivatives. Ribbon Finance takes 10% performance fees and 2% management fees. 50% of this revenue is distributed to RBN stakers.
Earn passive yield on your liquidity or trade derivatives on CompliFi.
CompliFi is a decentralized derivatives protocol focused on delivering a simple and strong return on capital for investors. The protocol uses investors' liquidity as collateral to create an algorithmic market in a range of financial instruments, allowing traders to implement a variety of sophisticated risk strategies.
When traders buy derivatives from CompliFi, the protocol uses your liquidity to collateralize these positions and takes the opposite side of each trade. In return, traders pay transaction fees. Your investment return consists of the fees collected from traders, plus the net performance of derivative positions the pool takes onto its balance sheet. The returns to liquidity providers are completely based on the generated fees and not on the pool subsidies. They are paid out in USDC, WETH, WMATIC, and WBTC.
Lifinity – Solana-based DEX with improved capital efficiency and reduced impermanent loss risk.
Lifinity is the first proactive market maker on Solana designed to improve capital efficiency and reduce impermanent loss. Some of its key features include concentrated liquidity combined with lazy liquidity provision – no need to adjust positions, it reduces impermanent loss by using an oracle as the main pricing mechanism, and generates a profit from market-making through delayed rebalancing of pools.
Lifinity sets target liquidity for each of its pools and dynamically adjusts the share of trading fees allocated to LPs. The protocol revenue is the sum of protocol fees, trading fees generated by their POL (Protocol Owned Liquidity), and the market-making profit (MMP) that is withdrawn as profit. Half of our revenue is distributed to veLFNTY holders in the form of ETH, SOL, USDC, and some other tokens, and the other half is used for LFNTY buybacks. To become a veLFNTY holder you’ll need to lock LFNTY for up to 4 years, but no less than 7 days.
Trade FOREX and Crypto with up to 50x leverage on Cap Finance.
CAP is a free, decentralized trading protocol. It's designed to be fast and easy to use by anyone It enables you to trade directly from your wallet with up to 5x leverage and 0% trading fees. You can pool ETH or USDC to back trader profits and receive a share of trader losses or stake the protocol's native token, to receive a share of protocol revenue. As mentioned above, CAP stakers get to earn a share of the protocol’s revenue, which is paid out in USDC and ETH, not newly minted tokens.
Stablecoin Strategies to Weather the Storm
Given the cooling of the market, a lot of people moved at least a portion of their portfolio away from the risky altcoin holdings into safer stablecoins. But why leave them to sit idly in your wallet, when you can put them to use and earn some additional yield?
In this feature we’ll look into a few protocols that offer products for generating yield on stablecoins and some examples of potential strategies – lending to funds through undercollateralized loans, creating delta-neutral strategies, using leveraged stablecoin positions to generate a higher yield from lending funds, and more. However, be aware that all these strategies still hold a certain amount of risks.
Trade fully fungible leveraged tokens on Tracer and create delta-neutral strategies.
Tracer is a derivatives meta-protocol. It can design and install financial derivatives as deployable protocols that anyone can access. These protocols are deployed from Tracer Factories, whose structure allows anyone to create their own financial protocol template and propose it to the DAO.
Strategy: Tracer offers high APR on staked tokens. For example, in combination with Balancer, you can get yourself 3-BTC/USD+USDC Balancer LP – it is a delta neutral strategy, which holds 33% in 3x leveraged long BTC pool tokens, 33% in 3x leveraged short BTC pool tokens, and 33% in USDC. These Balancer LP tokens can be staked on Tracer for ~20% APR at the time of writing. You can access the same products for ETH and WTI. The rewards are paid out in the TCR token.
Access automated options strategies with Ribbon to earn sustainable yield.
Ribbon uses financial engineering to create structured products that deliver sustainable yield. Ribbon's first product focuses on yield through automated options strategies. The protocol also allows developers to create arbitrary structured products by combining various DeFi derivatives.
Strategy: Ribbon currently supports the following strategies with USDC being the “deposit asset” – T-USDC-P-AVAX & T-YVUSDC-P-ETH. Both vaults earn a yield on their deposits by running a weekly automated put-selling strategy, where the put options are collateralized by the deposited asset. The vault reinvests the yield it earns back into the strategy, effectively compounding the yields for depositors over time. This, of course, isn’t a risk-free strategy as the price of the put option can expire in-the-money, however, the current projected yield (APY) is 64% for the AVAX strategy and 100% for the ETH strategy.
Borrow up to 21x against your portfolio of LP tokens, staked assets, and yield-bearing stablecoins with 0% interest on Yeti Finance.
Yeti Finance is a decentralized borrowing protocol that allows users to borrow up to 11x against LP tokens, staked assets, and base assets — and up to 21x on yield-bearing stablecoins at 0% interest.
Farming and staking rewards are auto-compounded when interest-bearing tokens such as staked assets or LP tokens are deposited, opening up numerous leveraged farming strategies. Borrowers receive YUSD, an overcollateralized stablecoin that can be swapped for additional assets and subsequently re-deposited into Yeti Finance to build a leverage position.
Strategy: Supply USDT on AAVE, open an aUSDT Trove on Yeti and borrow YUSD at a safe limit, swap YUSD for USDT on Curve, go to AAVE, and deposit USDT to receive aUSDT. Go to Yeti and open a new Trove where you deposit aUSDT for YUSD, and repeat the process to reach your desired leveraged exposure. The AAVE yields will be auto-compounding, however, depending on the leverage you engineer, you might be at a high risk of liquidation in case USDT depegs.
Easier & less risky – supply USDT on AAVE, receive aUSDT which you use to borrow YUSD on Yeti. Deposit YUSD on Platypus through Vector for ~9% APR.
Maximize Convex APYs and earn yield in the best DeFi tokens on Concentrator.
Concentrator is a yield enhancer that boosts yields on Convex vaults. Users deposit Curve LP tokens, which are automatically staked in Convex vaults. Rewards are periodically harvested, swapped to cvxCRV, and deposited in the Concentrator vault. The Concentrator vault stakes deposited cvxCRV on Convex, then auto-compounds the resulting rewards back to more cvxCRV.
Strategy: Concentrator allows you to earn boosted Convex yields – For example, you can deposit liquidity into the Curve frax pool and then stake fraxCrv on Concentrator. The rewards are then automatically swapped to cvxCRV and deposited in the Concentrator auto-compounding pool.
Access higher yields with Maple Finance by providing liquidity for undercollateralized loans.
Maple is a decentralized corporate credit market. It provides capital to institutional borrowers through globally accessible fixed-income yield opportunities. It allows funds to leverage their reputation to borrow undercollateralized without constant fear of liquidation and margin calls while allowing the liquidity providers to access higher yields on their loaned assets to offset the risk.
Strategy: deposit USDC into Maple’s under-collateralized lending pools which are used by Alameda, Maven 11, and Orthogonal Trading for 5-10% APY.
Leverage your yield farming positions with Alpaca.
Alpaca Finance is the largest lending protocol allowing leveraged yield farming on BNB Chain and Fantom. It helps lenders earn safe and stable yields, and offers borrowers undercollateralized loans for leveraged yield farming positions, vastly multiplying their farming principal and resulting profits.
Strategy: Farm VAI-BUSD PancakeSwap pool. On Alpaca, you’ll find a VAI-BUSD farm, which currently offers a 10% APY. The APY comes from yield farming APR and the last 7-day average trading fees. You can use Alpaca’s leveraged farming functionality, to push the APY to around 15% with 4x leverage.