Yield Farming Report # 11

Yield Farming Report # 11

Farming with Beethoven X, Loop Finance, Chest.fi

Disclosure: Members of Nansen may be participating in some of the following strategies and farms. This statement discloses any conflict of interest and is not a recommendation to purchase any token or participate in any of the mentioned farms. This content is for informational purposes only and is not investment advice. Please exercise caution if you are participating in these strategies.

Introduction

This week's farming opportunities span across Fantom, Terra and Solana ecosystems. The 3 opportunities we cover include the following:

Farms

Fantom

Beethoven X

Beethoven X is a Balancer-friendly fork (voted by the Balancer community) that aims to be the leading decentralized investment platform on Fantom. Beethoven X offers both stable and volatile pools that contain between 2 to 8 different tokens with fully customisable weights. Beethoven X’s multi-asset pools can be said to operate similar to an inverted index fund - rather than paying fees to portfolio managers to rebalance your portfolio, you collect fees from traders, who rebalance your portfolio by following arbitrage opportunities. The pitfall of this is that it leaves one open to impermanent loss on volatile pools. Yield on Beethoven X is derived from (a) swap fees from traders and (b) the native token $BEETS by staking your liquidity provider (LP) tokens. 

Terra

Loop Finance

Loop Finance is a DEX built on the Terra ecosystem that is offering incentivized farms through their native governance token $LOOP. We focused this report on Loop because they just added new farms for $aUST pairs and many members use the Anchor protocol for yield already. In short, if you deposit $UST for 20% interest on Anchor, you can now earn dual rewards - 20% on your $UST deposits in Anchor and $aUST yield across multiple pairs on Loop. Of course, there is IL and you will later need the $aUST to redeem your $UST from Anchor later on. In this case, the yields are lucrative enough to be able to cover for any IL that may be incurred but of course DYOR as the yields will fluctuate.

Solana

Chest

Chest.fi is a project on Solana which helps users get exposure to complex strategies, by simply allowing them to deposit assets into a vault and earn yield. It uses options, futures and lending strategies to generate yield for different assets. At the moment, Chest vaults run weekly automated call-cover and put-cover options to earn yield for stakers. Each chest will have its own risk-reward curve, with riskier chests having a higher potential payout than less risky chests. A projected APY is displayed on each chest to estimate the vault returns for stakers and it currently ranges from 30-52% APY. 

Farming Guide

We will go over each farming opportunity, give step by step guides, and go over the risks and opportunities associated with each of them. Yield from these opportunities may comprise the protocol’s native token and other protocol rewards.

Format

Each farming opportunity will follow the same format. 

  1. A brief summary of the protocol we are focusing on
  2. An overview of the popular pairs and their respective yields and risk
  3. Key takeaways from the pools mentioned
  4. Tutorial on how to LP/Farm in the given pool

If we utilize Nansen dashboards, we will give a tutorial/guide on how to recreate the dashboards for your farming activities.

Data as of January 5th, 2022
Sources: Beethoven X, Loop Finance, and Chest

Beethoven X

(website/twitter)

Summary

Beethoven X is a Balancer fork that aims to be the leading decentralized investment platform on Fantom. Beethoven X offers both stable and volatile pools that contain between 2 to 8 different tokens with fully customisable weights. Beethoven X’s multi-asset pools can be said to operate similar to an inverted index fund - rather than paying fees to portfolio managers to rebalance your portfolio, you collect fees from traders, who rebalance your portfolio by following arbitrage opportunities. The pitfall of this is that it leaves one open to impermanent loss on volatile pools. Yield on Beethoven X is derived from (a) swap fees from traders and (b) the native token $BEETS by staking your liquidity provider (LP) tokens. 

Beethoven X Pools

Traditional liquidity pools like on Uniswap and SushiSwap have 2 tokens with a 50:50 ratio. Liquidity pools on Beethoven X can have up to 8 tokens with any arbitrary token ratio. This can have positive impacts regarding impermanent loss and token exposure versus 50:50 pools.

For example, the FTM/USDC pool’s composition is 70% FTM : 30% USDC. The higher weighting of FTM in the pool increases exposure to the price of FTM and reduces the impact of impermanent loss while allowing the LP to capture high yield.

Farms currently range from 20% - 190% with a total TVL of $130m at the time of writing.

If you want to learn more about the $BEETS token you can check out their GitBook where you can find information regarding their tokenomics and token emissions.

Data as of January 5th, 2022
Source:
Beethoven X

Takeaway

The $BEETS token is ~80% off ATH and remains at a relatively low market cap of ~$26m and FDV of ~$142m. This certainly gives room for strong growth. It will also soon implement an xSUSHI (fBEETS) model whereby 30% of protocol fees are distributed to LPs of the 80:20 BEETS/FTM pool. In addition, fBEETS holders now will have bi-weekly votes to determine the distribution of 30% of $BEETS incentives in the pools. This gives the token good utility.

However, token emissions are high. There is currently a circulating supply of ~46m and a maximum supply of 250m. All tokens will be in circulation within 4 years of TGE (which was October 8th 2021).

Source: Beethoven X

For those bullish on the Fantom ecosystem and the potential of Beethoven X to become a leading AMM on Fantom - hodling and compounding $BEETS makes sense. While it may moon, it is important to bear in mind it is a highly risky and volatile asset that could easily plummet in value. 

For those with a lower risk profile, and who are primarily chasing farming returns the natural strategy would be to cash out $BEETS rewards. 

Tutorial for Beethoven X

Note that you will need FTM in your wallet in order to participate on the Fantom Opera Network. You can bridge your assets to Fantom here from most EVM chains. 

  1. Head over to https://app.beets.fi/#/pools and connect your wallet. You will be asked to switch to the Fantom Opera network if you have not already. After connecting your wallet, select which pool that you would like to enter.
  1. After selecting the pool (in this case, ‘Fantom of the Opera’ pool which is weighted 30% USDC : 70% FTM), click on the green button ‘Invest’.
  1. Here you can invest your token(s). This demo wallet only has FTM. The protocol will automatically convert your tokens to the 30:70 ratio in the background. Click ‘Preview’ to proceed.
  1. Select ‘Invest’. This will create your Beethoven Pool Tokens (“BPTs”) which will entitle you to the trading fees of the pool. 
  1. After this translation has been completed, scroll down and you will see ‘Farm’ in which you can deposit your BPTs to receive $BEETS yield. You can withdraw your liquidity at any time.
Image

Loop Finance

(Website/Twitter)

Loop Finance is a DEX built on the Terra ecosystem that is offering incentivized farms through their native governance token $LOOP. We focused this report on Loop because they just added new farms for $aUST pairs and many members use the Anchor protocol for yield already. In short, if you deposit $UST for 20% interest on Anchor, you can now earn dual rewards - 20% on your $UST deposits in Anchor and $aUST yield across multiple pairs on Loop. Of course, there is IL and you will later need the $aUST to redeem your $UST from Anchor later on. In this case, the yields are lucrative enough to be able to cover for any IL that may be incurred but of course DYOR as the yields will fluctuate.

Loop Farming Exposure Summary

Data as of January 5th, 2022
Source:
Loop

Takeaway

Loop Finance has decent liquidity and is offering good yields on some of the majors on Terra - $LUNA, $ANC, $UST, and $MIR amongst others. To highlight, we think that the $aUST farms offer very competitive yields, and increase the capital efficiency of one’s Anchor deposits. They are relatively new as they were just added on January 4th, 2022 and offer high yields. In addition, if you take exposure to $LOOP then you can earn some higher yields on the majors - although this does take on more risk. Note, they are looking to add $BTC, $ETH and other tokens in the roadmap so that might be something to keep note of for future farming opportunities. Again, all of these pools are exposed to IL, including the $aUST pools, so please exercise caution with Loop and manage your risk accordingly. The farming contracts have been audited by a third party and by the Loop team but the official TFL audit is still in progress.

Tutorial for Participating in Loop Farms

Rewards immediately accrue after you deposit funds and are distributed hourly. Note, there is a 2 week minimum staking period before rewards can be claimed. However, you can withdraw at any time.

Loop Farming Tutorial

  • If you are not familiar with Terra, please reference our wallet and bridging guide here
  • Once you are set up with a funded Terastation wallet, navigate to Loop’s pools
  • Click on the ‘Pool’ button on the right hand side. You will enter the amount of each asset you would like to add and set your desired level of slippage
  • Once you have added liquidity, you will navigate to the farm page and click on the ‘farm’ button on the right hand side. A pop up window will appear and you will stake the LP tokens for the pool and click ‘Stake’
  • Once you have staked your LP tokens, you will begin earning $LOOP rewards
  • You can withdraw funds at any time but the rewards earned will have a 2 week minimum staking period before you can claim them.
Image

Chest.fi

(Website/Twitter)

Chest.fi is a project on Solana which helps users get exposure to complex strategies, by simply allowing them to deposit assets into a vault and earn yield. It uses options, futures and lending strategies to generate yield for different assets. At the moment, Chest vaults run weekly automated call-cover and put-cover options to earn yield for stakers. Each chest will have its own risk-reward curve, with riskier chests having a higher potential payout than less risky chests. A projected APY is displayed on each chest to estimate the vault returns for stakers and it currently ranges from 30-51.9%  APY.

It is important to note that each chest has a time countdown and withdrawing funds before the time runs out is not possible. When a fund is withdrawn before the yield countdown expires, its status changes from "Locked" to "Withdrawable next," indicating that it is still participating in the current yield round but will be automatically removed from future ones. It is also possible to withdraw before the next chest begins at the end of the yield countdown.

The protocol charges a 10% performance fee on profitable chests and an annualized management fee of 2% (a reduced fee of 0.5% applies for SOL chests). The project’s total TVL stands at around +$10Million.

Chest Strategies and APY breakdown

Data as of January 5th, 2022
Source:
Chest.fi

Takeaway

The project offers decent yields across the different chests. More specifically, the USDC Yield Booster chest offering an estimated 35% APY is very attractive for a stablecoin vault. The chests are free from risks such as IL and there is no exposure to the native token,  however there are other risks that come into play. The project is still in the development phase and is an alpha build. The total value locked is still around $10 million. Additionally, it’s worth remembering that in some scenarios strategies can also lead to losses. On the other hand, using the project at an early stage - before the release of the native token could have some rewards such as potential airdrops.

Tutorial for Chest.fi

1. Connect your wallet

Currently supported wallets include: Phantom, Sollet, Slope, Solflare, and Ledger (hardware)

2. Select a chest

Choose a chest based on the strategy and asset you wish to stake in. You can refer to the estimated APY and strategy descriptions to make your choice.

3. Deposit tokens into the chest

When depositing into a chest for the first time, you will also send an additional transaction to create a user account. This account is purely for backend purposes and is needed to keep track of your earnings. The cost of this transaction is a few cents. You will only need to do this once.

If an active chest is already underway, your deposits won't earn you yield until the next chest, but by depositing early, they will automatically be added to the next chest when the time comes. You can refer to the "Next Chest Starts" countdown to see when the next chest starts.

4. Wait for the yield countdown to end

The yield countdown represents the amount of time left until yield is generated and redistributed to stakers. This countdown depends on the chest's strategy and parameters.

Ex: For a covered call chest, the yield countdown represents the amount of time until the option expires. If the option expires below the strike, the stakers will earn a premium. See more here.

5. Collect yield

You can collect your yield at the end of the yield countdown either by :

  1. Withdrawing at the end of the yield countdown, and before the next pool starts
  2. Withdrawing during the yield countdown, which will automatically move your funds to the "withdrawable next" pool. This amount still participates in the current yield pool but will not participate in the next and future ones.

Note: If you choose to keep your yield in the pool it will automatically compound week over week.

Closing Thoughts

We hope you guys found this report useful and feel free to recreate any of the above mentioned strategies for other farms. Please reach out in the Discord to let us know if there are any questions you might have or further opportunities you’d be interested in the Alpha team exploring. 

These strategies involve smart contract risks, IL, and yields can fluctuate. Exercise these farms with caution and best of luck farming!

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