[Strategy Paper] High-Yield Stablecoin Exotics (1/2)
In our earlier paper, we have written about the general strategy of making earnings from your Stablecoins. This covers the relatively safe ways of achieving yield, e.g. putting into AAVE or Compound, Uniswap’s usdt-usdc pair, Curve/Yearn, or CEX like Binance, etc. The APY are generally single digit if the earnings are derived from lending or trading commissions; and 10% to 20% if there are extra liquidity mining incentives.
If you are willing to take a bit more risks, there are also high-yield stablecoin-based products. We are looking at 30% to 100% APY on your mainstream stablecoins. You can think of them as junk bonds in the traditional finance sense. Higher yield, but higher risk as well. The additional risks come from security loopholes, moral hazards, annonymousity, and many more. The higher yields come from inevitably the mining incentives in the form of platform tokens.
It’s bootstrapping like many tech start-ups do; giving away coupons or freebies to attract new customers. And many of these platforms may not last till next Christmas. But the charm of Deif is liquidity — a Deli investment usually allows its investors to cash out his earnings and principal any time. With this in mind, let’s celebrate this Christmas first.
Harvest is now one of the top Defi projects, and top 3 for asset management sub-category. We have published a detailed analysis on Harvest: Harvest Finance, the Passive Defi Fund Earning the Risk-Takers’ Money. Harvest is essentially a yield aggregator like Yearn, with a more risky asset allocation preference. It’s also aggressively using it native token FARM, as rewards. The yield is about 20% to 40% for stablecoins.
Idle Finance is the new kid in the block but getting attention quickly. Primarily it’s about the mining rewards that Idle is giving out, somewhere norther of 40%. Taking DAI for instance, Idle is giving an earning APY of 6.745% plus 2641.79 IDLE, its native token, to be shared amongst 24.76m DAI. Idle is trading at US$8.92 at this moment, and this translate into a mining reward of 34.7% APR. Compounded weekly and plus the earning APY, it’s a whopping 48.2% APY.
Idle is audited by Quantstamp. Idle is funded by a group of crypto VCs like Consensys. The team is not anonymous but rather low key, and you can only find their profit in the website’s brand assets page. They don’t look ugly.
KeeperDao is the opposite of MakerDao — it’s a liquidator. KeeperDao gathers funds and allows liquidators to borrow funds from it and liquidate vaults (in AAVE, Compound or anywhere on Ethereum) when they go burst. In a sense, it’s another flashloan project. KeeperDao is generously subsidizing its liquidity providers (and liquidation strategists) with its native token Rook.
It’s worth highlighting that it’s also giving ETH deposits a yield of 18.27%, and this is considered high as high compared to other platforms.
KeeperDao has been audited by Quantstamp, PeckerShield and samczsun. The team seems to be anonymous, except for Roman Arsenovich who is listed in Discord channel as team (and reciprocates in his twitter a KeeperDao link). Or it’s just one man.
Rari Capital is an automated fund that invests depositers’ stablecoins or ETH into other platforms. For now, it’s pretty heavy in mStable, a new stablecoin platform with incentives. Rari charges its users a fee of 10% on the yield, but gives back RGT token in return. The yield is great, but it’s only for 60 and is ending soon (Dec 19). At its peak, the yield can be over 100% APY.
There are a few more platforms, e.g. dForce, Fortube, etc. and there will be more coming out. We do not exhaust all the projects here. In addition, there are also synthetic ways of making stablecoin based returns. We will be explaining this in the next article.
(Serenity Team, 17 Dec 2020)