⍺ DeFi Alpha: Optimize DeFi Lending Yields With P2P Matching on Morpho

• Yields: Up to 136% APY on Stablecoins, 8-12% on ETH and BTC

• Starter Tutorial: Earn Up to 136% APY Lending USDT to Stargate on Arbitrum with Pickle Finance

• Degen Tutorial: Optimize DeFi Lending Yields With P2P Matching on Morpho

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.

• Stablecoins – 136% projected APY with the Pickle Finance jar for the Stargate USDT pool on Arbitrum

  • This yield is backed by PICKLE, STG, and the auto-compounding of these rewards performed by Pickle Finance.

  • To participate, one must first deposit USDT into this Stargate pool on Arbitrum and then stake the LP token here on Pickle Finance under the STARGATE USDT jar. Check out today’s beginner tutorial!

• ETH – 11.94% APR with the wETH/sETH LP staked in Velodrome on Optimism

  • This yield is accrued in VELO.

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

• WBTC – 8.51% APR with the Curve tBTC2 LP staked in StakeDAO Liquid Lockers

  • This yield is accrued in CRV 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 the TBTC2 Liquid Locker.

• AVAX – 6.7% 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 – 7.84% APY lending stSOL on Tulip Protocol + 5.3% 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 – 23.88% APR with the 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 – 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 – 29.3% 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.

  • 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 Up to 136% APY Lending USDT to Stargate on Arbitrum with Pickle Finance

One of the earliest DeFi protocols for automating yield strategies is Pickle Finance.

Pickle enables users to take advantage of yield farming opportunities. With DeFi growing rapidly on Ethereum L2s like Arbitrum, the dependency on multichain bridges has also presented an opportunity to earn yield as a bridge liquidity provider (LP).

One such omni-chain bridge is Stargate Finance, where DeFi users can swap assets cross-chain on Stargate within a single transaction. In the future, Stargate is likely to be built into DeFi apps to incorporate cross-chain transactions, but for now, we’re still in a very nascent liquidity bootstrapping phase. As a result, Stargate still offers STG liquidity mining rewards in exchange for depositing native assets into the Stargate protocol, including stablecoins.

Today, I’ll show how I can earn up to 136% APY, with the Stargate USDT pool on Arbitrum, and then stake the LP token in a Pickle Finance jar which enables me to auto-compound my yield + 7% APY in PICKLE rewards.

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

• Smart contract risk in Stargate Finance and Pickle Finance

• Front-end spoof attack on the websites for Stargate and Pickle Finance

• Exploits in economic design, especially common with cross-chain bridges

• Governance attacks or admin key compromise

• Systemic risk in DeFi composability

• Pegged assets such as USDT can potentially depeg 

Step 1: First, I go here to the USDT pool for Arbitrum on Stargate, connect my wallet, and specify how much USDT to deposit. Then, I follow the prompts to Approve + Get LP Token (2 transactions).

Step 2: Next, I go to the Pickle Finance dApp here under Jars & Farms, search USDT and find this Jar for STARGATE USDT with the Arbitrum logo. I specify to deposit the max amount of tokens I have from depositing into the Stargate USDT pool and follow the prompts to Approve and Deposit (2 transactions).  

🦍 Defiant Degen Tutorial

Optimize DeFi Lending Yields With P2P Matching on Morpho

Morpho is a lending optimizer that adds a peer-to-peer matching layer on top of established DeFi money markets. It has launched with support for Compound as its initial market and has a rewards program for its MORPHO token running until September 20.

Note that MORPHO isn’t trading yet, but can be pre-farmed by depositing and borrowing assets using the protocol.

The largest DeFi money markets like Aave and Compound use a variable interest rate model that adjusts rates based on the utilization of available liquidity. Historically, utilization has been low since the depositors looking to earn yield far outweigh the borrowers.

This imbalance has led to large spreads between the two sides of the market.

Here’s where Morpho comes in.

Lenders and borrowers are matched automatically when using Compound through the Morpho platform. While this doesn’t happen for all deposits and loans (the website currently indicates 78% matching), a peer-to-peer match results in a better deal for both the borrower and lender.

P2P matching is presently enabled on UNI, USDT, COMP and FEI. The projected yields in MORPHO tokens can be seen on the Markets page.

Important Note: The displayed figures are not APRs. Instead, they show the number of MORPHO tokens that can be earned annually for every $1,000 of assets deposited or borrowed.

MORPHO has a total supply of 1B tokens and raised $18M in July in a funding round led by a16z and Variant.

Today, we’re going to supply some USDT since it has the highest yield in terms of MORPHO tokens.

Step 1: Head over to Morpho and connect your wallet.

https://compound.morpho.xyz/?network=mainnet

Click on the USDT supply market and enter the amount you wish to deposit.

Approve spending your USDT and confirm your deposit.

That’s it! You’re now earning either the base Compound yield or P2P rate if your deposit gets matched with a borrower. In addition, you’ll be accumulating MORPHO rewards that you can claim once the token starts trading.

Step 2 (Optional): Boost your MORPHO earnings further by folding some assets. Folding refers to depositing and borrowing the same asset recursively.

For example, one could borrow some ETH against the initial USDT deposit, and deposit the borrowed ETH back into Morpho to earn rewards on both sides of the transaction.

Note that there is an interest cost involved due to the spread between lending and borrowing rates. Such a strategy would prove profitable only if the value of the MORPHO rewards once the token starts trading, exceeds the interest cost.

📰 Elsewhere on The Defiant

Tuesday Tutorial on The Defiant YouTube: This week, Robin covered alternatives to Tornado Cash, including Aztec protocol’s zk.money. 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.