Non-custodial DeFi management tools are becoming increasingly relevant as yield farms become one of Ethereum’s killer narratives. Compound, Curve, Synthetix, and yEarn are a few examples. All of these protocols provide appealing profit opportunities for anyone with idle cash. However, they are difficult to utilize (sometimes even harder to understand).
This is why DeFi management tools are essential. They abstract away the complexity of these systems so that everyone may profit from the opportunity. One of them is Instadapp. They’ve been a strong player in the market, with over $300 million in value locked up. And they provide some of the greatest yield farms options in DeFi.
Let’s get to the next level and learn how to maximize our yields with Instadapp.
Understanding the principles of yield farms
Yield farming, also known as liquidity farming, begins by allowing an investor to stake their coins by putting them into a lending protocol via a decentralized app or dApp. Other investors may then borrow the coins through dApp to speculate on, hoping to profit from significant fluctuations in the coin’s market price.
“Yield farming is just a rewards program for early adopters,” explains Jay Kurahashi-Sofue, VP of marketing at Ava Labs, a firm that is assisting in the creation of the Avalanche public blockchain, which integrates with multiple defi apps that provide yield farms.
Users of blockchain-based apps are rewarded for providing liquidity by locking up their currencies in practice, known as staking. “Staking happens when centralized crypto platforms receive deposits from users and lend them out to people in need of credit,” Hill explains. “Creditors pay interest, depositors receive a portion of it, and the bank keeps the rest.”
“Smart contracts often conduct this financing,” explains Brian Dechesare, former investment banker and CEO of financial career portal Breaking Into Wall Street. “Smart contracts are essentially simply a piece of code running on a blockchain that functions as a liquidity pool.” “yield farms users, also known as liquidity providers, lend their cash by putting them into a smart contract.”
Investors who place their coins on the yield-farming platform may earn interest and, in many cases, extra digital coins — the main benefit of the arrangement. If the value of the new coins rises, so will the investor’s rewards.
According to Kurahashi-Sofue, this approach offers the liquidity that freshly released blockchain apps require to support long-term growth. “By paying users with incentives such as their own governance tokens, app transaction fees, and other cash, [these applications] may enhance community involvement and secure this liquidity,” Kurahashi-Sofue explains.
Kurahashi-Sofue goes on to say that yield farms is similar to the early days of ride-sharing. “Because Uber, Lyft, and other ride-sharing apps needed to bootstrap development, they offered incentives to early customers who recommended additional users to the platform,” he explains.
According to Daniel J. Smith, professor of economics at the Political Economy Research Institute at Middle Tennessee State University, another incentive for staking is accumulating enough cryptocurrency shares to force a hard fork in which a major infrastructural change is made to the design of the cryptocurrency.
“Hard forks enable cryptocurrency holders to compel modifications that, in the opinion of the majority of holders, benefit the coin moving ahead,” Smith explains. Hard forking provides crypto investors the same authority that shares voting affords stocks. In the same way that shareholders can vote on major issues impacting the management or direction of the firms in which they invest, cryptocurrency holders can utilize hard forks to steer a cryptocurrency protocol in a specific direction.
Smith adds that staking coins to trigger a hard fork “allows crypto to take on (this) crucial attribute of equity investments” and “moves crypto from a cash-like investment in a portfolio to a quasi-equity investment.”
How to Use Instadapp to Increase Farm Yield
Since late 2018, the DeFi ecosystem has been thriving. On the other hand, on June 15th, a popular new word, “yield farms,” arose, urging users to grow their assets and harvest their yields, a.k.a. Increase their earnings by earning native tokens using DeFi’s passive income options. While the notion has been known for a while, the yield farms meme emerged with the release of the Compound’s COMP—the protocol’s native governance token.
Said, this approach compensates COMP users for borrowing or contributing assets to the network. In response to the frenzy, Instadapp created a recipe dubbed “Maximize COMP Mining” to make this process as simple as a few clicks.
A leveraged position is used in this yield farm method. In order to obtain more COMP, users borrow and deposit assets at the same time. By expediting the recycling process, users/investors may make better use of their trading money.
Instadapp now supports two types of yields (excluding ETH). This involves gaining COMP through Compound and SNX through Curve. So, here’s how it works and how you may capitalize on current market opportunities:
Goal: Discover how to optimize your COMP production (plus a bonus strategy for farming SNX on Curve!)
Expertise: Beginner/Intermediate
30 minutes of effort
ROI is determined by the distribution and pricing of the COMP.
Get Started
Check that your web3 wallet is successfully linked on the Instadapp Dashboard.
If you haven’t already, make a DSA. After creating a DSA, deposit the cash you want to play with from Metamask.
Farming to Increase COMP Yield
After making the transaction, go to the “Compound” option on the top right and deposit the stablecoins as collateral to start maximizing your COMP profits.
On the Compound dashboard, choose the “Maximize COMP Mining” recipe.
The “Maximize COMP Mining” recipe combines three transactions. These transactions often loop three to four times, depending on your position; however, at Instadapp, we leverage flash loans to abstract them into a single transaction.
Under the hood, you’ll be doing a similar sequence of the following transactions:
- Purchase USDC debt
- Swap USDC for DAI
- DAI can be used as collateral.
This technology makes the best use of and maximizes your cash in order to amass more and more COMP. In the present market, DAI> DAI leverage provides the best COMP return. YES, you are lending DAI in order to borrow DAI. Wild!
Debt and Collateral Swaps – Crop Rotation
DSA’s powerhouse is flash loans. They enable one-of-a-kind use cases like “Debt Swap” and “Collateral Swap” to simplify complex transactions by combining them into a single transaction.
These sorts of swaps can be useful since they allow you to switch your debt on Compound in a single step with a single click. You may, for example, convert debt from USDT to DAI, paying less interest, earning more COMP, and saving on transaction expenses.
You may carry out this sort of transaction by heading to the Compound dashboard and selecting the “Debt Swap” recipe.
Bonus: Curve SNX Yield Farming
As one of the first liquidity mining/yield farms protocols, Synthetix provides a variety of opportunities for anybody to earn a considerable income by providing value-added services to the protocol.
Option #1: sUSD
As a result of the collaboration between Curve and Synthetix, sUSD pools are now accessible on Curve with the goal of delivering stability to Synthetix’s stablecoin. As a result, customers get not only Curve trading fees but also SNX incentives – Synthetix’s native coin.
The pool includes a varied range of stablecoins such as sUSD, DAI, USDC, and USDT. If you want to participate in this Curve pool, go to the Curve Dashboard on Instadapp. Under the sUSD pool, select Deposit.
After depositing the desired amount, you can claim your SNX tokens whenever you want. They also accumulate on every block!
Option #2: sBTC
Putting idle bitcoin to work on Curve, on the other hand, is a terrific way to create some yield in a non-custodial, trustless manner.
Curve’s sBTC pool allows you to receive SNX, REN, and BAL in addition to trading fees. This is one of the most diversified agricultural income options available in the game right now.
Navigate to the sBTC pool on the Curve Dashboard, select “Deposit,” and then input the amount of Bitcoin you want to deposit.
After depositing, you will receive BPT tokens, which are Balancer Pool tokens comprised of SNX and REN. By pressing the “remove liquidity” button, you may redeem your BPT for SNX and REN at the Balancer Pool’s address.
And there you have it! With Instadapp, you are now optimizing your yield. You can do any of these actions natively via InstaDapp, whether it’s COMP mining or leveraging the Curve + Synthetix combo.
In conclusion
Yield farming entails stealing or locking up your bitcoin in return for interest or additional cryptocurrency. “As cryptocurrency grows more popular, yield farms will become more common. It’s a basic premise that has existed for as long as banks have, and it’s simply a digital version of lending with interest to profit investors, “Hill states.
While yield farms can produce significant rewards, it is also quite dangerous. A lot may happen while your bitcoin is locked up, as illustrated by the frequent price changes in cryptocurrency markets.
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