Yields: Up to 30% APR on Stablecoins, 6-21% on ETH and BTC
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.
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 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.
📈 Yield Alpha
Each week we will provide options to earn yield on ETH, WBTC, stablecoins, and other major tokens.
ETH -21% APR with wstETH/ETH LP staked in KyberSwap on Optimism
This yield is accrued in LDO + KNC tokens.
To participate, one must deposit and stake in the wstETH + WETH LP.
A step-by-step guide can be found in last week’s DeFi Alpha
WBTC – 6.22% projected vAPR with Curve tBTC2 LP staked in Convex
This yield is accrued in CRV, CVX, and trading fees.
To participate, one must first deposit tBTC, renBTC, sBTC and/or WBTC into this Curve tBTC2 pool and then stake the LP here in Convex.
AVAX – 8.97% APR with AVAX in Vesper Grow Pools
This yield is issued in 8.14% AVAX + 1.38% VSP.
To participate, one must deposit into the AVAX pool here in Vesper
There is a 0.6% fee on withdrawal from Vesper Grow pools and a 15% platform fee on yield generated by the deposited assets.
SOL – 11.02% APY lending stSOL on Tulip Protocol
This yield is backed by 5.35% APY paid by borrowers on Tulip + 5.67% APY in staking rewards thanks to Lido.
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 – 18.43% APY with 50/50 MaticX-WMATIC LP on MeshSwap
The yield is backed by validator rewards using the MaticX liquid staking derivative + MeshSwap trading fees + MESH rewards + SD rewards.
To participate on Polygon, I use the Stader MaticX dApp to mint MaticX.
Then, I deposit into the MaticX-WMATIC pool on MeshSwap and stake the LP.
ATOM – 18.6% APR staking ATOM with Keplr Wallet on Cosmos Hub
The yield earned is issued in ATOM.
To participate, one must set up a Keplr Wallet, go to the Cosmos Hub validators on Keplr Dashboard, rank by APR, choose a validator, and click Delegate.
Then, I specify how many ATOMs and follow the prompts to Delegate.
FTM – 4.7% APY staking 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 – 10.88% APY staking with HBARX liquid staking derivative by Stader
The yield is issued in HBAR rewards, as HBARX is earning validator rewards.
To participate, one must deposit HBAR to receive HBARX here on Stader.
Stablecoins (USD) – 30.28% APY with sUSD in an auto-compounding vault strategy on Reaper Farm on Optimism
This yield is accrued in sUSD.
To participate, one must deposit and stake in the sUSD Sonne Crypt.
Caution: This farm is in a higher risk protocol that launched on Fantom in summer 2021 and has since suffered a $1.7M exploit in August 2021.
📱DeFi Alpha Call
The DeFi Alpha call is held every Monday at 2pm ET in Discord.
In case you missed it, check out the recording of this week’s call.
👨🎓 Starter Tutorial
Open An Undercollateralized DeFi Credit Line With Union Finance
One of the most talked about trends in DeFi has been undercollateralized borrowing. To date, we’ve mainly seen money flow into protocols like Maple Finance which build infrastructure to cater to larger borrowers. Maple helps creditors manage fast-flowing lending businesses with pooled capital lent to crypto institutional borrowers like market-makers and VCs.
Going further back to 2020, Aave introduced the concept of “credit delegation” where a borrower and delegator (creditor) can agree to an undercollateralized loan but the concept has yet to take off, without a UI to support it on the Aave homepage.
However, in March 2022, a new protocol for building programmable credit lines was quietly launched. Union Finance is a member-owned credit protocol built on Ethereum and Arbitrum, where members can underwrite lines of credit to other members (aka vouch). As a member, you can borrow from a pool of DAI by simply gaining trust from your friends in Union who vouch for your credit line.
Borrowers are required to pay the interest on their borrowed DAI (currently 10.03% APR) in 30 days or less or else their loan goes into default. What’s even more interesting is that vouchers and borrowers can be contracts and DAOs, so these programmable lines of credit are not just person-to-person.
As borrowers, Union enables us to permissionlessly accumulate a credit line on-chain. The Union protocol is not an underwriter of risk. Instead, it’s a mechanism for coordinating trust into available credit. The mission of the Union Finance community is to enable a virtuous circle of more available credit, lower borrowing costs, and increased lending activity.
While very promising, Union is still a very experimental protocol in DeFi. Check out the on-chain stats for Union here including DAI staking, lending, borrowing, defaults, and more on both Ethereum and Arbitrum.
Above, you’ll notice that not all staked DAI is available for borrowing. One has to opt to mint uDAI, making their DAI available for members to borrow, and as of today despite there being about 301k DAI staked on Ethereum and 121k DAI staked on Arbitrum, there’s respectively only 15k uDAI and 31k uDAI in supply, with ~2k uDAI available to be borrowed on Ethereum and all uDAI borrowed on Arbitrum. In Union V2, there will be easier access in-dApp to mint uDAI and hence help to make more uDAI available to borrowers.
Today with Union V2 just around the corner, I’ll show how I recently became a member of the Union Finance DAO and how I’m borrowing 100 DAI, despite having only staked 50 DAI.
Before we get started, please be aware of these risks.
Smart contract risk in Union Finance and Aave
Front-end spoof attack on the union.finance website
Exploits in economic design
Governance attacks or admin key compromise
Systemic risk in DeFi composability
Pegged assets like DAI can potentially de-peg
What I’ll demonstrate doesn’t have liquidity risk in Union but there is liquidity risk if all DAI were borrowed in Aave
Step 1: To get started, I need to become a member of the Union Finance DAO either on Ethereum Mainnet or Arbitrum. If I were getting started today, I would join on Ethereum because there’s no uDAI available to borrow from Union on Arbitrum as of this writing.
After connecting my wallet here, it will require three steps.
Staking any amount of DAI to earn UNION. The DAI stake will not be used to borrow. For this example, I opted to stake 50 DAI.
You need 1 existing Union member to vouch for you, which will form your starting credit line within Union. I chose to share my own Union link on Twitter and in the Union Discord under #vouch-requests to get members’ attention. In my example, mattwerner.eth was kind enough to vouch for me.
Once I’ve earned 1 UNION, I can claim it and pay my membership fee by burning 1 UNION token.
Tip: when burning 1 UNION, if I click on “Approving with transaction,” I can opt to “Approve with permit” and use a gasless transaction.
Step 2: Once I’m a member, you can see my simple dashboard here for tracking Available Credit, Balanced Owed, Vouch, and Minimum Due in however many days.
In my example below, I can borrow DAI against my Available Credit. Note that my account is on Arbitrum where there is currently no DAI available to borrow but you hopefully get the point if you’re on Ethereum!
Step 3: Lastly, I can continue to build my credit by doing any of the following:
Requesting other members I know to vouch for me by sharing my Union profile link
Staking DAI, which is used in “market adapters” to earn yield for the DAO by lending DAI to Aave
Borrowing with my existing credit line and making sure to pay the owed interest every 30 days or less
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🔗Read the full article at thedefiant.io🔗
Bridge to StarkNet and Swap Tokens For Potential Airdrops
StarkNet is a Layer-2 scaling solution for Ethereum that utilizes zero-knowledge proofs. It was created by StarkWare, an Israeli startup backed by the likes of Sequoia, Paradigm, and Coinbase Ventures, and major users include dYdX, Sorare, and Immutable.
Details around the $STARK token were sketchy until some alpha was leaked during the Three Arrows saga.
Back in May, we did some testnet transactions on StarkNet, and it’s now time to take mainnet for a test drive.
Let’s get started.
Step 1: Set Up Argent X Wallet – StarkNet is not compatible with Metamask, so you’ll need to install Argent X, a browser-extension wallet.
Download the Chrome extension here.
Create a new wallet. You’ll be asked to choose a password.
Step 2: Bridge some ETH to StarkNet.
Enter the amount you wish to bridge and confirm the transaction.
Bridging from Ethereum mainnet costs around $2 in gas at 15 gwei and it took approximately 10 minutes for the ETH to arrive on StarkNet.
Step 3: Swap Tokens and Add Liquidity On MySwap
MySwap is a DEX that’s in live alpha on StarkNet mainnet.
I’m going to swap some ETH for USDC and add liquidity to the ETH/USDC pool.
Once the swap is complete, add liquidity on the ‘POOLS’ tab.
After the transaction is confirmed, your position will be displayed under the liquidity interface.
You can also try out some of the other active protocols since none of them have a token yet.
🪂 Airdrop Alpha
In each DeFi Alpha guide, we update a list of DeFi protocols that have yet to announce and/or launch a token.
NFT AMM SudoSwap has released details about its SUDO token and airdrop.
🎉If you followed our guide from August 12 and created some trading pools, you should be eligible!🎉
Layer-2 rollup Arbitrum kicked off a months-long program on June 21.
Participants will be able to claim NFTs based on completing various tasks.
Week 1 was Bridge Week and we walked you through it in a previous issue of DeFi Alpha.
In a previous Degen Tutorial, we covered a series of on-chain quests.
We’ll be watching for the Odyssey to resume, now that Nitro is live.
Congratulations if you followed our guide betting on a hunch that Optimism would release a token!
In a previous DeFi Alpha, we covered a series of on-chain quests that could make you eligible for the next round of $OP airdrops.
$OP is Live! Claim guide here.
Arch Finance – a protocol for comprehensive indices that provide access to differentiated sources of market risk.
Aztec – an open source L2 bringing scalability and privacy to Ethereum, with zkSNARK proofs, having launched a private DeFi yield aggregator zk.money.
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.
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.