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⍺ DeFi Alpha: Earn Higher Stable Pool Yields With Velodrome On Optimism

  • Yields: Up to 18% APR on Stablecoins, 12-19% on ETH and BTC

  • Starter Tutorial: Higher Stable Pool Yields with Velodrome on Optimism

  • Degen Tutorial: 28% APR in ETH With GMX’s GLP Multi-Asset Pool

DeFi Alpha is a weekly newsletter published for our premium subscribers every Friday, contributed by Defiant Advisor and DeFi investor at 4RC, DeFi Dad, and our Degen in Chief yyctrader. It aims to educate traders, investors, and newcomers about investment opportunities in decentralized finance, as well as provide primers and guides about its emerging platforms.

Motivation

Two years ago, DeFi investors could easily name every yield farming opportunity without much effort. It was a simpler time, when only a handful of teams had launched with any liquidity to trade, lend, borrow, provide liquidity, or even demonstrate new primitives such as no-loss savings by PoolTogether.

But times have changed! Before the current bear market took hold, DeFi liquidity had grown to hundreds of billions of dollars across Ethereum with new burgeoning DeFi economies taking shape on EVM-compatible chains such as Polygon and Avalanche and non-EVM chains such as Cosmos and Solana. Any given day, a new DeFi or NFT project is launched.

So, after writing and creating countless DeFi guides and tutorials since 2019, we at The Defiant agreed it’s time we publish a more detailed weekly guide on all you need to know to keep up with new and old yield earning opportunities. 

This is DeFi Alpha by The Defiant.

Any information covered in DeFi Alpha should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions. Any mention of a token or protocol should not be considered a recommendation or endorsement.

🙌 Together with: 

  • DeFi Saver provides you with the only automatic liquidation protection and leverage management options on Optimism. Automate your Aave v3 position management now with drastically lower tx fees.

📈 Yield Alpha

Each week we will provide options to earn yield on ETH, WBTC, stablecoins, and other major tokens.

  • ETH – 12.56% APR with the wETH/alETH LP staked in Velodrome on Optimism

    • This yield is accrued in VELO.

    • To participate, one must deposit and stake in this wETH + alETH LP.

  • WBTC – 19.32% projected vAPR with the Curve pBTC LP staked in Convex

    • This yield is accrued in CRV, CVX, and trading fees.

    • To participate, one must first deposit pBTC, renBTC, sBTC and/or WBTC into this Curve pBTC pool and then stake the LP here in Convex.

  • Stablecoins – 18.18% projected vAPR with the Curve pusd LP staked in Convex

    • This yield is accrued in CRV, CVX, and trading fees.

    • To participate, one must first deposit PUSd, USDT, DAI, and/or USDC into this Curve pusd LP and then stake the LP here in Convex.

  • AVAX – 13.5% APR lending AVAX to the sAVAX/AVAX pool on Platypus via Vector

    • This yield is issued in VTX, PTP, QI, and AVAX.

    • To participate, one must deposit into the AVAX Stake option here on Vector.

  • SOL – 14% APY lending stSOL on Tulip Protocol + 5.64% APY from the underlying SOL liquid staking rewards issued to stSOL holders

    • This yield is backed by interest paid by borrowers on Tulip + staking rewards.

    • To participate, one must deposit stSOL in the Tulip lending tab.

    • To obtain stSOL, one can trade on a Solana DEX or mint it here on Lido.

  • MATIC – Net 21% APY with LP MaticX-MATIC on Balancer

    • The yield is backed by validator rewards using the MaticX liquid staking derivative + trading fees on Balancer + BAL rewards + SD rewards.

    • To participate on Polygon, one can use the Stader MaticX dApp to mint MaticX.

    • Then, I deposit into the 50/50 MaticX-MATIC pool on Balancer and stake the LP.

  • ATOM – 13.5% APR staking pATOMs on pSTAKE on Ethereum

    • The yield earned is issued and claimable in pATOM.

    • To participate, one must first mint a 1:1 representation of ATOM as pATOM on Ethereum by using the pSTAKE dApp under Stake

    • Then, deposit/stake pATOMs to get stkATOMs and earn 13.5% APR 

  • FTM – 13% APY staking with sFTMx liquid staking derivative by Stader

    • The yield is issued in FTM rewards, as sFTMX is earning FTM via validator rewards to support Fantom’s PoS network.

    • To participate, one must deposit FTM to receive sFTMX here on Stader.

  • HBAR – 31.9% APY staking with HBARX liquid staking derivative by Stader

    • The yield is issued in HBAR rewards, as HBARX is earning validator rewards.

    • To participate, deposit HBAR to receive HBARX here on Stader.

    • Caution: This is in beta and withdrawals may not be possible until July 2022 or later.

🪂 Airdrop Alpha

In each DeFi Alpha guide, we update a list of the most obvious DeFi protocols that have yet to announce and/or launch a token.

Arbitrum Odyssey

Layer-2 rollup Arbitrum kicked off a two-month-long program on June 21.

Participants will be able to claim NFTs based on completing various tasks over the summer.

Week 1 was Bridge Week and we walked you through it in a previous issue of DeFi Alpha.

Participants can now claim their Week 1 NFTs.

Week 2 involved the GMX derivatives protocol but was paused after heavy traffic on Arbitrum caused gas fees to spike.

https://twitter.com/arbitrum/status/1542159105946787840

We’ll be watching for the Odyssey to resume.

Optimism Airdrop

Congratulations if you followed our guide betting on a hunch that Optimism would release a token!

$OP is Live! Claim guide here.

  • Arch Finance – a protocol for comprehensive indices that provide access to differentiated sources of market risk.

  • Concentrator – Congrats if you used Concentrator! They’re currently running an Initial Farming Offering (IFO) and are expected to distribute CTR tokens to early users of Concentrator.

  • DeFi Saver –  a one-stop dashboard for creating, managing and tracking DeFi positions across Aave, Compound, Maker, Liquity, and Reflexer

  • Francium – leveraged yield farming similar to Alpha Homora but on Solana, one can choose to simply lend single assets or hold leveraged LPs to potentially earn an airdrop here

  • Jupiter – The leading DEX aggregator by trading volume on Solana

  • LI.FI – A cross-chain bridge and DEX aggregator protocol

  • Liquality – A cross-chain, non-custodial browser extension wallet, similar to MetaMask but with more integrations for swapping cross-chain.

  • Magic Eden – The leading NFT marketplace by trading volume on Solana

  • Nested – a crypto social trading platform built on Ethereum and other chains

  • Opyn – one of the OG decentralized options protocols on Ethereum, with major investors that signal a token has to be in their future. Buy/sell puts or call options to earn a possible future airdrop.

  • Polymarket – one of the strongest players in the DeFi prediction market vertical, bet on an outcome related to crypto, politics, sports and more or add liquidity

  • Polynomial – A newer DeFi derivatives vault creator, built on Optimism

  • Sense Protocol – A decentralized fixed-income protocol on Ethereum, allowing users to manage risk through fixed rates and future yield trading on existing yield bearing-assets

  • Set Protocol – one of the earliest DeFi protocols yet to launch a token for DeFi asset management, popular for TokenSets and known for powering IndexCoop indexes

  • Socket (formerly Movr) – their bridge aggregator Bungee moves assets between chains, finding the cheapest, fastest route

  • Volmex – Volmex is a tokenized volatility protocol, similar to the VIX but ETHV

  • Wormhole – a cross-chain messaging protocol known for bridging between Solana, Terra, Polygon, BSC, Avalanche, Fantom, and Oasis

  • Yield Protocol – a newer protocol for fixed-term, fixed-rate lending in DeFi, backed by Paradigm, one might earn a future airdrop by lending DAI or USDC 

  • Zapper – participate in Zapper trading, lending, providing liquidity, or yield farming; given the Zapper Quests and NFT Rewards program, it can be surmised that if Zapper ever releases a token, this is one way they might do a retro airdrop

  • Zerion – same can be said speculated about Zerion; if they ever release a token, they’re likely to reward those who interacted with their smart contracts swapping, lending, providing liquidity, or borrowing

  • ZigZag – a DEX on zkSync that’s announced an upcoming airdrop.

  • zkSync is a Layer 2 scaling solution for Ethereum that uses zero-knowledge proofs to enable scalable low-cost payments. Bridge some assets and do some swaps for a potential airdrop. Guide here.

👨‍🎓 Defiant Starter Tutorial

Earn Higher Stable Pool Yields with Velodrome on Optimism

A little over one month ago, Velodrome launched as a new automated market-maker (AMM) and liquidity marketplace on the Ethereum L2 Optimism. Based on the foundational work of Andre Cronje’s Solidly on Fantom, Velodrome aims to provide a solution for protocols to bootstrap liquidity by aligning protocol emissions with fees generated, not just liquidity.

To achieve this, Velodrome allows protocols and other large stakeholders to become veNFT voters, using locked voting power to direct future emissions to specific pools while voters collect trading fees from the pools they voted for, including bribes deposited to incentivize gauge voting for liquidity pools.

Here’s a breakdown of what’s referred to as ve(3,3) tokenomics:

  • veVELO holders vote on which liquidity pools receive weekly VELO rewards, and pools earn in proportion to the voting power they accrue each week.

  • The Velodrome liquidity providers in those pools earn VELO emissions, based on how much liquidity they have in a pool.

  • Meanwhile, veVELO holders earn the trading fees generated by the pools they vote for in proportion to their voting power, as well as the bribes paid to the pools they vote for, and from veVELO rebases which are non-dilutive because veVELO holders receive veVELO instead of VELO.

You can think of Velodrome as a mash-up of different utility DeFi users enjoy in Curve, Convex, and Votium. Like Curve, Velodrome offers lower fees, lower slippage trades and uses a CRV-like vote-escrowed gauge system for directing its own token emissions. What’s new conceptually is the use of gauge voting to incentivize veNFT voters receiving trading fees and bribes vs the way Curve LPs passively earn trading fees regardless of where veCRV voters direct CRV emissions.

Velodrome has two different types of pools: Volatile Pools for uncorrelated assets (ie ETH-DAI) and Stable Pools for correlated assets (ie stablecoins or ETH-stETH). The trading fees for both liquidity pool types are 0.02%.

It remains to be seen whether or not Velodrome’s incentivization is an improvement over the popular veCRV tokenomics but for now, it’s worth noting in less than 2 months since launch, Velodrome makes up about 12% of TVL ($129M vs $1B on Optimism). More indicative of its traction is Velodrome’s steady increase in daily swap volume (see Dune dashboard).

Today, I’ll show the simplest way for me to get involved earning yield in the form of VELO emissions as an LP in a Stable Pool on Velodrome!

Before we get started, please be aware of these risks.

  • Smart contract risk in Velodrome on Optimism

  • Front-end spoof attack on the website app.velodrome.finance

  • Exploits in economic design

  • Governance attacks or admin key compromise

  • Systemic risk in DeFi composability

  • Pegged assets such as stablecoins or stETH can potentially depeg 

Step 1: First, let’s assume I need to pick a pool to earn with stablecoins or pegged assets I already hold like alETH. I go to the Velodrome dApp -> Pools and click Connect Wallet in the top right hand corner.

Step 2: Then, I filter by Stable Pools and rank them by APR or search by asset (ie USDC or WETH) before scrolling by APR.

Step 3: Let’s assume I already hold ETH or WETH on Optimism and notice 11.51% APR I can earn with an LP composed of alETH + WETH. I then click the Manage button on the far right. Reminder: we are not recommending this LP, and simply using this as an example. 

Step 4: Lastly, on the Manage Liquidity Pair page, I specify how much of either alETH or WETH to deposit, the app auto-fills the other token amount based on the pool ratio. I click Deposit & Stake and follow the prompts to Approve both tokens, followed by 2 more transactions to Deposit and finally Stake. I will return in the future to claim my VELO rewards!

🦍 Defiant Degen Tutorial

Earn 28% APR in ETH With The GLP Multi-Asset Pool on GMX

GMX is an Arbitrum-based decentralized exchange that offers zero-slippage spot trades and leveraged perpetual futures for BTC, ETH, UNI, LINK and AVAX (on Avalanche).

It’s done over $50B in trading volume and has the support of prominent investors like BlockTower Capital and Arthur Hayes.

GMX differs from other exchanges through its use of a unique multi-asset pool to facilitate trades. The GLP pool acts as a central clearing house for leveraged trades on GMX. In other words, GLP is the counterparty for all trades – when traders lose, the house wins.

It’s well known that leveraged traders tend to lose money, and degens have accrued nearly $36M in cumulative losses on the platform.

This brings us to GLP.

GLP is a multi-asset pool that consists of BTC, ETH, UNI, LINK and popular stablecoins (USDC, USDT, DAI, FRAX). The weights of the various assets are targeted to hedge traders’ outstanding positions. For example, if many traders are long ETH, the target weight for ETH in GLP will also increase.

Current GLP Weights: 51% stablecoins, 30% ETH, 16% BTC with the remainder in LINK and UNI.

A more detailed explanation of the mechanism can be found in the protocol’s documentation.

Liquidity providers are incentivized to rebalance GLP through dynamic minting fees. Currently, the dashboard shows that GLP is overweight ETH and underweight BTC.

Consequently, it’s cheaper to mint GLP with BTC than ETH.

GLP is currently yielding 28% APR paid in ETH from trading fees.

Before we dive in, here are some of the risks to be aware of:

  • If leveraged traders start ‘winning’ consistently, GLP will be negatively affected as it is ‘The House’.

  • Smart contract risk. GMX has been audited but as we’ve seen time and again, audits aren’t foolproof.

Let’s get started.

Step 1: Head over to GMX and check the GLP asset weights to determine which asset is the cheapest to mint with.

https://app.gmx.io/#/buy_glp

WBTC is the cheapest option at the time of writing (USDT has no fee but there’s limited availability).

Step 2: Bridge your asset of choice to Arbitrum using your preferred bridge.

If you need to swap for WBTC, you’ll likely find better pricing on mainnet. Acquire WBTC or your asset of choice before bridging.

Note that gas fees on Arbitrum are paid in ETH. Check out last week’s tutorial on Refuel by Bungee, which lets you send small amounts of gas tokens with minimal cost.

Bungee also lets you swap and bridge tokens at the same time. Here, I’m swapping 1000 USDC for WBTC and bridging to Arbitrum.

Step 3: Mint and stake GLP.

https://app.gmx.io/#/buy_glp

Approve your assets and confirm the transactions.

That’s it! You can then track your ETH rewards on the staking page.

📰 Elsewhere on The Defiant

Tuesday Tutorial on The Defiant YouTube: This week, Robin covered rhino.fi (formerly DeversiFi), a Layer-2 gateway to multi-chain DeFi. Learn how and subscribe to The Defiant on YouTube!

The information contained in this newsletter is not intended as, and shall not be understood or construed as, financial advice. The authors are not financial advisors and the information contained here is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation. We have done our best to ensure that the information provided is accurate but neither The Defiant nor any of its contributors shall be held liable or responsible for any errors or omissions or for any damage readers may suffer as a result of failing to seek financial advice from a professional.

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