I want to start this column with a reminder that all of this technology is still relatively new to the world. Yield optimizing financial strategies are what made me interested in cryptocurrency and markets more broadly. Suddenly there was a world of options and opportunities.
There are lots of risks involved including exploits leading to the loss of user funds just for participating in this ecosystem.
Don’t interact with anything you are not familiar with. Look after yourself first. Always take it slow. Never rush in DeFi.
To get you started on your own yield optimization discovery, here is a quick overview of Reaper.Farm & Robo-Vault, two of the leading Fantom-native platforms.
What is Reaper.Farm
- Reaper.Farm is currently a collection of 300+ extremely simple & tax-efficient yield optimizing financial strategies.
- At Reaper.Farm, vaults are called Crypts because they sound cooler. Each Crypt is scanned roughly every five minutes and if it is profitable to do so, compounds. The result is a supercharged yield generated purely from the power of DeFi incentive structures and compound interest.
- They are composed of two battle-tested smart contracts which do one simple job each.
- The Vault Contract accepts LP (for example FTM-USDC SpLP) tokens and stakes them at the farm provider (SpookySwap). The Vault contract also issues shares to represent the portion of LP owned by each address interacting with it.
- The Strategy Contract ‘owns’ the vault contract, and calls the harvest function on the farm incentives(say BOO on SpookySwap for example), and proceeds to make whatever transactions required to create more of the deposited LP (FTM-USDC spLP token) stored in the aforementioned Vault contract.
- More complex strategies are emerging on Reaper.Farm now which have additional technologies such as Keepers. Keepers are bots that complete a series of in-demand tasks which otherwise would be inefficient and sub-optimal if done by people. They are used to drive the TAROT supply crypt rebalancer and SpookySwap BOO MirrorWorld optimizer. These strategies are unique to Reaper.Farm and help to ensure both markets are delivering sustainable yield, a win-win for users and protocols.
Things to consider with single strategy crypts
- You know where your funds are which allows you to make your own risk assessments on assets.
- Less complex
- Potential yield typically higher.
- More active participation is required, you need to think for yourself.
What is Robo-Vault
- Robo-Vault provides 8+ high-performance single-sided multi-strategy vaults which are extremely easy to interact with and simply compound into more of the deposited An asset is anything of monetary value that can be owned or .... Deposit USDC, compound into USDC.
- There are also some new select ‘degen’ multi-strategy vaults which aim to please those happy with higher risk for higher reward.
- These vaults are extremely flexible which allows Robo-Vault to keep all strategies relevant and useful. They can add new strategies and remove irrelevant or unprofitable strategies as DeFi markets evolve. This is very convenient for the user as they can set it and forget it.
- Robo-Vaults contracts are complex in comparison to the simple strategies in Reaper.Farm. They include difficult mechanisms like deploying a portion of deposited asset, borrowing against it in a money market and pairing with more of the deposited asset to create LPs which are then used to farm rewards. These rewards are then harvested and converted back into the base asset. Rinse and repeat. It is technically impressive to have this be secure and sustainable.
- They are composed of many more than two smart contracts, the exact number depending on what opportunities there are for the asset.
- There is still a base Vault Contract which accepts and secures deposits and withdraws.
- Instead of a single Strategy Contracts there are many.
- There is a Keeper which consistently scans the available single Strategy Contracts to source the best yield on behalf of the Vault Contract.
- Keepers are critical to the success of these vaults. They need to be able to react to extreme market conditions to protect users’ funds. So, Robo-Vault actually makes use of an in-house engine, as well as two others provided by Gelato & OpenZepplin. Nice.
Things to consider with multi-strategy solutions:
- Yield is diluted across all strategies.
- This means that the deposited assets don’t always access the best yield available.
- It also means that if you’re in a strategy that drops to 0% yield from emissions ceasing, your personal loss from downtime is mitigated as you are still accessing that same shared yield. You’re earning all the time.
- So it is protection against downside risk but mitigation of upside reward.
- Not just yield, all risks are more distributed since funds aren’t sitting in just one farm provider. If something catastrophic happens the downside impact can be minimized to the specific strategy which only would hold a portion of the total funds within the vault.
- Multi-Strategy solutions remain relevant longer as they can be upgraded and users don’t need to touch anything until they reach the end of their personal time horizons.
- You can easily see what strategies are active through this amazing dashboard: http://analytics.robo-vault.com/
Put simply, it sure is nice to have options.
Each has advantages and it’s clear Fantom users are sure spoiled for choice.
I wonder, what would a Reaper multi-strategy service look like? Well, that’s probably best saved for another piece I’d say.