Yield farming is an attractive proposition within DeFi and has become a magnet of the ecosystem’s liquidity infrastructure. Users are constantly looking for lucrative stablecoin yields to maximize yields from their yield farms. In this regard, Overnight’s flagship stablecoin – USD+ – is delivering lucrative returns and is on par with some of the most lucrative returns within DeFi.
Yield farming refers to the provision of liquidity to facilitate and incentivize trading, borrowing, derivatives and other activities – this is at the heart of DeFi. In this article, we will explore some of the lucrative yield farming strategies in the ecosystem and compare the enticing APYs (between 8% and 12% APY) that USD+ offers.
Let’s take a look at some of the most popular yield farming strategies and how to implement them.
Synapse allows users to provide utility for Nexus-pegged stablecoins (nETH or nUSD) and earn passive swap fees and SYN rewards (the protocol’s native token) in return. The protocol aims to create high liquidity for its derivatives and has amassed a TVL of $50 million across all chains for its stableswap.
A stableswap can be described as a decentralized exchange that supports trading between highly correlated assets with minimal price impact. For example, users trading between stables want to maximize the amount they get from the trade – a high price effect would act as a deterrent to them. Therefore, a stable swap allows you to do just that.
Synapse’s stableswap runs on multiple chains, which means you can provide liquidity on the chain you want in exchange for 7-9% APY on your stablecoins or Ethereum – a tempting proposition.
Credit and credit are vital for DeFi participants. It allows participants to borrow and lend money as they please and earn passive income on the side. Lenders earn interest on their borrowed amount, while borrowers benefit from the liquidity gained at the expense of paying lenders.
Clear Pool is one such platform, allowing institutional investors – including Wintermute, Amber Group, Parallel Group, etc. – to borrow loans from retail investors; This is a relatively new trend in DeFi.
Interest rates are determined purely economically, i.e. on the basis of supply and demand. The more of the provided assets are deducted by the institute (utilization ratio), the more dynamically the interest rates rise. For a detailed overview of the usage curve, refer to the chart of the specific institution you want to lend to – the following is for Ledger Prime.
Clearpool gives users autonomy by allowing them to lend in favor of their desired institution, each with different interest rates (see “Lend APRs” in the attached image). Potential lenders can also refer to the financial data (credit rating and other data provided) to make a more concrete decision. The total APR for loans is around 9-15% of the APR.
Folding is the act of opening a “credit” and “credit” position at the same time – this goes a step further than Clearpool and therefore has higher APYs. Typically, borrowers pay a higher interest rate than lenders; However, in this case it is profitable due to the token incentives (paid in native token – $SUN). Such rewards are lucrative when introducing a money market to encourage the accumulation of greater liquidity.
The idea behind folding can be illustrated as follows:
a) Lend USDC: Earn 4.33% net APY for lending USDC as collateral (sum of offer and reward APY).
b) Borrow USDC: Pay 1.45% for borrowing USDC versus your USDC (difference between credit and premium APY).
c) Loop: Redeem your loan to earn an additional 4.3% APR – the more loops you complete, the higher the APR. We recommend not going over 95% of your credit limit, allowing for looping. See the protocol documents for more information.
A single loop would earn you 2.85% APR (4.3-1.45), and a quadruple loop would earn you a total of 11.4% APR while still staying under a healthy credit limit. Note that folding for the same asset (USDC in this case) reduces the likelihood of liquidation since there are no price swings between your security and your loan.
This strategy requires active monitoring, so it may not be ideal for everyone. Once looping is no longer profitable, so will this strategy.
Echidna is a yield booster developed for Platypus Finance. This means users can earn increased APRs on their stablecoins without having to own $PTP – the platform’s governance token. Echidna Finance achieves this by using its own holdings of $PTP for this purpose.
The protocol offers a modest 6-8% APR for stablecoins – compare this to Platypus itself, where the base APR is a conservative 1-2%.
If you find it difficult to orientate yourself in the above strategies, then USD+ is your perfect companion. As you can see, navigating DeFi can be quite cumbersome, and USD+ offers its users simplicity while remaining true to offering lucrative returns.
USD+ is built by Overnight Finance – an asset management protocol – which allows users to mint their USD+ with USDC (or BUSD on the BNB chain) and then deploy the appropriate collateral in a variety of revenue-generating liquidity pools. Returns are paid daily and automatically compounded to maximize returns – APRs become more APYs.
Likewise, DeFi is versatile. Circumstances can often change – the above strategies may not be lucrative tomorrow. Therefore, the overnight protocol optimizes APYs with this in mind and cautions about risk management. This methodology allows it to offer lucrative returns throughout its lifetime.
The overnight log also promotes transparency, as users can always refer back to the collateral to determine revenue-generating turnover (see below for Polygon).
The end result is that a user will earn 8-12% APY just by holding USD+, thus making returns accessible where previously they weren’t.
The all-time APY for USD+
Visit here to get started – USD+ can be minted for the same amount of USDC and withdrawn at any time.
We have covered some of the most popular yield strategies within DeFi and concluded that due to DeFi’s versatility, no strategy can be lucrative throughout its lifetime. However, this dilemma is effectively solved by Overnight as its versatility allows it to switch to more lucrative strategies when needed and continue to offer its users consistent and attractive returns.
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