| liquidity mining and DeFi combined returns and risks

Original title: "Liquid Mining: Combinable Benefits and Risks"

Source: Blue Fox notes

Since The Inception of Compound's Mobile mining on June 15, DeFi has been fully activated and fueled the enthusiasm of the encryption community.

Rapid growth of DeFi

From locking up the amount of assets, the number of users to trading volume, have made a qualitative leap. From June 15 solstice on July 23, in just over a month's time, DeFi is growing at an extremely fast rate across the board.

Volume of locked assets

In just over a month, the amount of locked up assets increased from $1.1 billion to $3.35 billion, up more than 300%.

(DeFi has a total locked asset of more than 3.3 billion, SOURCE:DEFIPULSE)

users

In just over a month, the number of users increased from 205,011 to 262,179, an increase of over 27%.

DeFi total users growing fast, SOURCE:DUNEANALYTICS

Trading volume

In the past week alone, more than $1 billion has been traded, more than in all of last year.

(DEX hits $1 billion in last 7 days, SOURCE:DUNEANALYTICS)

DEX became CEX's DE facto rival.

These are just one aspect of the evolution of DeFi, and there are many more DeFi protocols on the way.

Major agreements for fluid mining

Balancer, Compound, Curve, trace, blood, mStable, Synthetix, Uniswap and so on are the major DeFi agreements currently providing mobile mining. Through these agreements, token COINS such as BAL, COMP, CRV, FYI, MTA and SNX can be dug out. Not only that, but as a liquidity provider, fees can be earned.

The current mining pool is mainly in Curve, Balancer, Compound and Uniswap, among which Curve and Balancer can not only dig out CRV and BAL, but also other protocol tokens, such as YFI, MTA, SNX, etc. These pools mainly include:

SBTC pool on Curve

The liquidity provided for sBTC pool can earn SNX, CRV, BAL and REN, but the current yield is down a lot. At the time of writing, the APY of Blue Fox note is only 1.98%, SNX/REN is 8.23% and BAL is only 1.98%.

SUSD pool on Curve

Providing liquidity for sUSD pool, it can earn SNX and CRV. When Blue Fox notes were written, its APY was 11.78% and SNX income was 30.46%.

Y pool on Curve

To provide liquidity for Y pool, it can earn YFI and CRV. At the time of blue Fox's writing, its APY was 5.35%, but YFI's income reached 446.12%.

(Liquidity pool on Curve, SOURCE: Curve)

In addition to the liquidity pool on Curve, there's also Balancer:

Musd-usdc pool in Balancer

Provide mobility for mUSD and earn MTA and BAL.

(USDC-Musd fluidpool, SOURCE:Balancer)

The Musd-pool in Balancer

Provide mobility for mUSD and earn MTA and BAL.

(WETH-mUSD liquidity pool in Balancer, SOURCE:Balancer)

Musd-mta pool in Balancer

Provide mobility for mUSD and MTA and earn MTA and BAL.

(ANCER MTA-Musd fluidpool, SOURCE:Balancer)

Balancer: Yfi-dai pool

Provide liquidity to YFI, can earn YFI and BAL.

(Yfi-dai Liquidity Pool, SOURCE:Balancer)

The iETH pool on Synthetix

SNX tokens are awarded by pledging iETH to Synthetix.

And more fluid mining...

However, due to DeFi's composability and non-permissibility, liquid mining is also composable, which leads to the extremely high returns and risks associated with DeFi's mining.

Liquidity mining and DeFi composability provide very high returns

Because of the composability of the DeFi protocol, users can earn revenue from different protocols. For example, users can deposit stability COINS into the Y-pool of Curve to earn scrip income and fees of CRV and YFI. After the stabilization currency was deposited by Curve, the liquidity token was generated to represent the user's share, and the liquidity token could be deposited in Balancer pool to earn the BAL token income and fees. Then I will pledge the liquid tokens on yearn Finance so that I can earn YFI tokens.

In this way, the liquidity provider can earn three kinds of token money at the same time, YFI, CRV and BAL. Moreover, because it provides liquidity to yPool, the yearn Finance is adjusted according to the best profit of loan agreement such as Compound and Aave, and can also earn the maximum interest income for the liquidity provider.

There are even crazier ways to play. Someone first borrowed stabilised currency on the lending platform Compound or Aave, using an encrypted asset such as the ETH, at roughly 4.6% interest, then replaced the USDC on DEX with SNX, mortgagedSNX on Synthetix and dug out sUSD, then bought more SNX and re-mortgagedSNX to dig out more sUSD.

Then the generated sUSD will be carried out in the y pool of Curve for fluid mining, and the YFI obtained from mining will be deposited in the YFI-DAI pool of Balancer, so as to earn SNX, CRV, YFI and BAL. Its annualized income, much higher than the original borrowing interest.

Of course, this may not be the optimal strategy, as the returns fluctuate with the price of different tokens and the share of participation.

Everything looks delicious, doesn't it? At the same time, however, there are high risks.

The composability of fluidmine and DeFi also carries high risks

All of the above may seem highly profitable, but there are high risks behind high yields. With the composability of the DeFi protocol, it is possible to earn super high returns, but it is possible to compose not only returns but also risks. The borrowed assets may be subject to the risk of liquidation. In addition, mortgaging or providing liquidity on a variety of smart contract platforms also has the risk of smart contract, volatile loss, and machine prediction. Therefore, to provide liquidity or pledge for DeFi, it is important to pay attention to risks and keep them within acceptable limits. Black swans are not common, but when they do appear, they are a huge loss.

The original link: https://mp.weixin.qq.com/s/5voohSF6jesXMg5Pw4G8tw

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