🧑🏫 Tuesday Tutorials: BarnBridge Yield Farming & Gyroscope Testnet
Hello Defiers, here’s what we’re covering today,
Today is tutorials day and we have:
In DeFi news:
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We will be hosting a weekly tutorial on the most compelling opportunities to consider yield farming, written by our friend DeFi Dad, an advisor to the Defiant and the Chief DeFi Officer of Zapper. The goal is to expose more Defiant readers to new DeFi applications and their associated liquidity mining programs.
Background on Protocol: In TradFi, fixed rate yields are a popular product. It allows investors to commit capital with a guaranteed return, often locked up for a set period of time. In comparison, DeFi has mainly structured products that offer competitive variable rates, with the ability to withdraw whenever you like, which has attracted those of us seeking the highest returns.
As the DeFi landscape matures and becomes more liquid, we’ll need to replicate products that allow investors to commit capital with a lower risk profile. DeFi newcomers from TradFi will undoubtedly seek opportunities like tranche lending that offer sizable returns when benchmarked against what they bought and sold on Wall Street.
BarnBridge has made waves launching their first tranche lending product just over a month ago and since then have attracted a little over $52M TVL, aside from the hundreds of millions deposited prior to this as part of a liquidity mining program for their governance token BOND. BarnBridge describes itself as the most advanced “fluctuations derivatives protocol for hedging yield sensitivity and market price.” But what exactly does that mean for us DeFi users?
Pooled collateral (ie USDC or DAI) is deposited by BarnBridge into lending protocols or yield generating contracts like Compound or Aave, and the yield is bundled into different tranches and tokenized. This allows one to buy the most senior tranche with a fixed interest rate locked in for up to 1 year, at a lower yield with a much lower risk profile while those in the junior tranches get higher yield, at a variable rate, can withdraw whenever they like, and have a mucher higher risk profile.
Here’s the rates today but I have seen Junior APY over 20% and Senior APY up to 14%.
The real upside for junior tranche holders is they benefit from the extra rewards generated by liquidity locked in the seniors whenever the variable APY of Compound (including the COMP rewards) is higher than the guaranteed yields of current sBONDs. However, in the event of falling lending rates on Compound, the returns of Juniors not only go down but if need be, their locked funds will be used to pay for the guaranteed returns of senior tranche lenders.
To jumpstart liquidity and incentivize junior tranche lenders given this risk of having to use funds to pay senior fixed rates, there is a SMART Yield pool, where a junior can stake their holdings and earn BOND through a familiar yield farming program. Above under Junior APY, the smaller number in the BarnBridge UI indicates that Juniors are earning 45.57% APY in BOND in the Smart Yield Pools.
Altogether, Juniors are clearly earning a substantial amount compared to Seniors and that’s what we’ll cover today!
Opportunities: BarnBridge offers 4 tranche lending products for stablecoins and 3 farming opportunities to earn BOND. Be aware all these estimated rates change constantly, unless you purchase senior bonds and get a guaranteed fixed rate for the life of the bond.
4.52% APY -> USDC Senior
6.78% APY -> DAI Senior
4.47% APY -> USDC Junior
6.68% APY -> DAI Junior
45.57% APY -> SMART Yield staking (for USDC Juniors only)
54% APY -> Staking BOND in BarnBridge DAO
133% APY -> Staking BOND/USDC LP
Time to Complete: 10-15 mins if paying the recommended FAST gas price on gasnow.org
Gas + Protocol Fees: Based on the FAST gas price on gasnow.org currently between 100-200 Gwei, I would estimate paying the following gas fees.
Depositing into tranches = $100-$150
Depositing into SMART Yield Pool = $30-$100
Staking BOND = $30-$100
Becoming a BOND/USDC LP = $60-$100
Staking BOND/USDC LP = $30-$50
Risks: As always, this is not financial advice and you should do your own research.
Smart contract risk
Financial incentive failure
Systemic risk in DeFi composability
Estimated APRs can go up or down with the price of BOND, pool liquidity, and lending rates on Compound
If I become an LP for BOND/USDC, I’m likely to experience impermanent loss.
TLDR Before, going viral offered didn’t much more than internet fame. Now, it’s providing the humans behind the memes with hefty paydays, thanks to NFTs. The recent upswing in NFTs has given memes a new monetization avenue to the tune of 100+ ETH sales. Most of these memes are selling on Foundation – the new kid on the block offering a sleek UX and open creator invite system.
NYAN CAT Internet sensation Nyan Cat kicked off the trend when it sold for 300 ETH, the highest sale on Foundation at the time. Now, other viral images have started to see strong primary market activity as well.
“Overly Attached Girlfriend” from Laina followed with a 200 ETH sale, earmarked by a seal of approval from the woman depicted in the meme itself.
Disaster Girl recently sold for 180 ETH, giving pictured Zoe Roth a multi-hundred thousand dollar payday on the back of an image that has previously offered no financial upside.
TVL An all-time high of 11.2M Ether is locked in DeFi protocols, despite a weekend sell-off. Liquidations spiked, while tokens continue sliding.
TOPPING UP COLLATERAL Locked Ether’s resilience may show that DeFi participants do not consider the recent drop in price to signal a long-term trend and thus are not unlocking their ETH in order to sell. Borrowers may also be topping up their collateral positions to prevent liquidations in case ETH continues to slide.
Total value locked in dollar terms is down to $54.8B from Thursday’s all-time high of $61.2B due to the underlying assets’ depreciation, according to DeFi Pulse.
LIQUIDATIONS SPIKE There was $47M worth of liquidations in DeFi protocols on Saturday. This was the third-highest mark ever according to DeBank, and almost five times higher than any other time this month.
49% of the liquidations happened on Aave’s V2, 30% on BSC’s Venus money market protocol, and 12% on Compound. In contrast with Mar. 2020’s Black Thursday, the fifth-highest DeFi liquidation event to date, which saw MakerDAO comprising over 90% of liquidations, the lending protocol contributed less than 1% of the liquidations in last Saturday’s crash.
TLDR Liquity Network, relatively unknown before its April 5 launch, now has $2.4B of ETH locked, placing it 11th among all Ethereum protocols, ahead of open finance mainstays Synthetix and Bancor.
SIMILAR TO MAKER The protocol resembles MakerDAO in that users lock up ETH in order to mint Liquity’s stablecoin LUSD, but differs from the DAI-originator in that it offers zero-interest loans and a lower collateralization ratio. Liquity already has $1.2B in LUSD. MakerDAO didn’t pass the $1B DAI mark until just over a year after multi-collateral-DAI launched on Nov. 18 2019, though in a much smaller DeFi ecosystem and amid a bear market in crypto.
ZERO-INTEREST LOAN Liquity’s zero-interest loans don’t mean free: borrowers pay a one-time, but variable fee (between 0.5% and 5%, currently 0.52%) when originating a loan with a “Trove” which functions similarly to Maker’s Vaults. Users must also set aside 200 LUSD to pay the transaction fee if their Trove is liquidated.
LGTY TOKEN Liquity also has a second token, LQTY, which accrues to Stability Providers, and frontend providers who maintain an interface to the protocol. When staked, LQTY captures borrowing and redemption fees in LUSD and ETH on a pro rata basis.
REWARDS PROGRAM Liquity Launched a six-week liquidity rewards program for the LQTY:ETH Uniswap Pool starting from when the protocol launched.
TLDR DeFi projects’ moves to Ethereum Layer 2s are coming weekly now with Curve Finance joining Polymarket and Aave in the quest for scalability. Curve has launched a pool on Polygon, the Layer 2 network which supports multiple interoperable solutions like a Proof-of-Stake chain and a Plasma chain. The pool hosts the most popular stablecoins, USDT, DAI, and USDC, making swaps orders of magnitudes cheaper than on Ethereum’s L1, where a Uniswap trade costs $100 at the time of writing.
TLDR Balancer Protocol’s updated smart contracts, which allow for users to further customize token pools, are now public and open source. The project is offering a 1k ETH bug bounty to spot vulnerabilities in the code.
AMM FLEXIBILITY Balancer’s new architecture is based on a single vault that holds and manages tokens, giving Balancer V2 flexibility to support different types of AMM logic. For more details on Balancer V2 read our previous coverage here.
BUG BOUNTY The team is offering up to 1k ETH or $2M, whichever is higher, for critical bugs that allow attackers to drain the Balancer V2 Vault.
TLDR NFThub, which describes itself as a landing pad to navigate the NFT metaverse, emerged from “stealth Beta” this week with the launch of its governance token $gNFT.
TOKEN DISTRIBUTION The $gNFT “token distribution event” takes place for 48 hours starting today at 4:20 EST. This governance token will enable the holder to “obtain shares in the Moloch DAO summoned to govern NFThub.” In addition, the token is intended to become a “multi-chain asset” in keeping with NFThub’s mission to connect the disparate lands of the NFT metaverse.
✊ Head to THEDEFIANT.IO for more DeFi news 📰
🧑💻 ✍️ Stories in this newsletter were written by Owen Fernau, Dan Kahan, Copper Turley, and Clyde F. Smith, edited by Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, edited by Alp.
The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access, while free signups get only part of the content. Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button above ($15/mo, $150/yr).