- Yields: Up to 24% APY on Stablecoins, 20-50% APY 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.
🙌 Together with:
- DeFi Saver is the most comprehensive dashboard for Liquity protocol with unique automated liquidation protection features. Now, with full support for the newly launched Chicken Bonds bonding protocol as well.
📈 Yield Alpha
Each week we will provide options to earn yield on ETH, WBTC, stablecoins, and other major tokens.
- ETH – 50.9% APY with pETH/ETH Curve LP staked in Convex via Concentrator
- This yield is accrued in aCRV + trading fees compounded in the LP.
- To participate, one must Deposit into the pETH/ETH Curve LP here(not stake).
- Then, one must stake/deposit the Curve LP under the ETH-pETHvault under aCRV Vaults on Concentrator.
- BTC – 20.39% projected vAPR with the Curve pBTC+sbtcCrv 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 factory pool and then stake the LP here in Convex.
- AVAX – 7.53% 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 – 7.41% APY lending stSOL on Tulip Protocol
- This yield is backed by 0.81% APY paid by borrowers on Tulip + 6.6% 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 – 12% 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 – 20% 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 – 9.66% 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) – 23.7% APY with USDC in the allape Notional Spool
- Be aware 16.8% APY of the yield backed by SPOOL rewards.
- To participate, one must deposit into the allape Notional spool here.
Please be aware we intentionally do not report the highest yield rates because often, those yields are less sustainable and in some instances, artificially elevated due to less participation
📱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.
Unlocking the power of your DeFi portfolio
We all know that managing a DeFi portfolio can be a significant challenge.
Especially during times of market turbulence, keeping your portfolio efficiently balanced can turn into a full-time job. Crypto is a 24/7 market that requires 24/7 monitoring of positions in order to be a competitive investor in the market.
Until now, the tooling needed to monitor your portfolio and ensure that your positions are allocated efficiently has been kept private. Mainly being used by institutional investors who can sit back and relax while their portfolios are maintained for them.
Mero is bringing professional DeFi tooling and automated liquidity management to every DeFi user. Through Mero, users can easily automate their liquidity to react to market conditions and ensure that it is always allocated where it should be.
The Defiant readers have the opportunity to become an early LP on Mero before its suite of portfolio automation products is released. Start earning yield using this link.
👨🎓 Starter Tutorial
Increase Your ETH Staking Yield by Arbitraging the Discount on Liquid Staking Derivatives
Given the devastating state of crypto markets with this week’s FTX meltdown, we wanted to cover a less risky beginner lesson in DeFi.
With the increased risk of insolvency among crypto borrowers and the contagion that may spread to different parts of the crypto markets, it’s a very appropriate time to think adversarially about how to avoid any DeFi that might suffer systemically from the markets unwinding. One such yield with less counterparty risk is holding an ETH liquid staking derivative.
While the best way to stake ETH is to run your own validator, LSDs allow anyone to earn ETH staking yield by simply holding a token, while contributing to the Proof-of-Stake consensus on Ethereum.
LSDs do not require the minimum 32 ETH to run a validator, which means anyone can stake ETH with as little as they want. This is very aligned with one of the core tenets of DeFi to be easily accessible to any wallet regardless of how little value they hold.
Second, the tokenization of staked ETH gives stakers more economic freedom to use the value of their staked ETH in other DeFi, such as liquidity provisions on Curve or as collateral to borrow against on Aave or Euler.
There are a number of risks to consider with liquid staked ETH. First, whether you hold an LSD or run your own ETH validator, you’re exposed to technical risk in the Beacon Chain, which could unknowingly have an error in its code prior to withdrawals being enabled in the next 6-9 months in the Beacon Chain. However, that risk is extraordinarily low at this point in the development of Ethereum 2.0.
A second major consideration is price risk–meaning the price of a staked derivative of ETH could go up or down depending on how the market values it. Leading up to The Merge in September, the discount for stETH by Lido rapidly closed back to 1:1 with ETH, compared to a 6-7% discount during the 3AC meltdown in June. Whether you hold an LSD or run your own validator, there’s also risk of slashing, but that risk is minimized in the recruitment of reliable entities to run validators for LSD protocols like Lido, Rocketpool, Stakewise, Ankr, and soon Stader.
Lastly, it’s important to understand whether one is holding an LSD by a DAO-governed protocol where the protocol is designed to hold your ETH while running validators in return for a percentage of yield, vs a centralized entity like Coinbase, who provides an LSD called cbETH so that customers can earn with staked ETH, but where there is real counterparty risk in trusting Coinbase to return your ETH.
Today, I’ll show how I might choose to buy discounted liquid staked ETH, and earn more ETH based on i) the staking yield and ii) the price of the LSD increasing to be equal to 1 ETH once withdrawals are enabled for staked ETH in the Beacon Chain.
Before we get started, please be aware of these risks.
- Smart contract risk in any LSD governed by a protocol, including cbETH by Coinbase
- Front-end spoof attack on any frontend website for minting an LSD or buying it off the market for a discount
- Exploits in the economic design of any protocol
- Slashing risk
- Staked ETH price risk
- DAO key management risk
- Beacon Chain technical risk
- Beacon Chain adoption risk
Step 1: First, I go to SimpleStakers.info which is a helpful free website tracking the market price and estimated staking yield of different ETH liquid staking derivatives.
Even more helpful, they’ve calculated the total yield earned based on the LSD discount + the annualized staking yield rate, with whatever timeframe you want to assume must pass before staked ETH withdrawals are enabled on the Beacon Chain (what we’ll assume will close the price gap between the LSD and ETH being 1:1).
Step 2: If I adjust SimpleStakers.info so that “staked ETH will unlock in 6 months,” the 1% discount on Lido’s stETH, which is trading at ~0.99 ETH as of this writing, with a reported staking yield of 6.75% APY, will net out 9.25% APY.
Just for this example, I’m going to opt for stETH by Lido because I prefer to not have counterparty risk exposed to a centralized entity like Coinbase (my personal preference), and I like the ability to borrow against stETH on Aave or Euler.
Although rETH by Rocketpool has a higher estimated yield of 9.4% APY and promises comparably less risk of fewer entities holding more power in their DAO, I cannot borrow against rETH on Aave yet.
So I go to a DEX aggregator like CoWSwap or 1inch, connect my Ethereum wallet, and specify buying stETH by Lido with my ETH (if CoWSwap, it’ll require WETH).
Using the Shardeum Testnet for a Potential Airdrop
Shardeum is an upcoming Layer 1 blockchain that raised $18M in seed funding last month. It was co-founded by Nischal Shetty, a co-founder of WazirX, the largest crypto exchange in India.
It’s EVM-compatible, meaning smart contracts that work on Ethereum can be easily ported over, and promises ‘infinite scaling’ through the use of sharding.
In this tutorial, we’re going to test some dapps on Shardeum’s Liberty alphanet, which could make us eligible for a potential SHM airdrop.
Let’s get started.
Step 1: Add the Shardeum Liberty 1.6 network to Metamask
Settings > Network > Add a Network > Add a Network Manually
Network Name – Shardeum Liberty 1.6
New RPC URL – https://liberty10.shardeum.org/
Chain ID – 8080
Currency symbol – SHM
Block Explorer URL – https://explorer-liberty10.shardeum.org/
Step 2: Obtain Test SHM Tokens
There are two ways to get test tokens:
1 – Official faucet – https://faucet.liberty10.shardeum.org/
Follow the instructions to receive 100 SHM.
2 – Discord faucet – Join the Shardeum Discord and use the bot in the #faucet-1-6 channel.
Step 3: Test some apps
Name Service – https://dotshm.me/
Swapped Finance – https://www.swapped.finance/
ShardeumSwap – https://dex.shardeumswap.finance/
Swapped Finance – https://www.swapped.finance/
Globalswap – https://globalswap.netlify.app/
Create an NFT on Spiro – https://www.spriyo.xyz
DexPad – Create your own testnet token at https://dexpad.io/token-factory
🪂 Airdrop Alpha
In each DeFi Alpha guide, we update a list of DeFi protocols that have yet to announce and/or launch a token.
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
- Lens Protocol – A decentralized composable social graph, underpinning an emerging landscape of Web3 social media dApps including Lenster, Lenstube, and Orb
- 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
- StarkNet mainnet is live! Bridge and swap some tokens for a potential airdrop. Guide here.
- 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!
- 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.