Articles about #DEFI

How to calculate true APR/APY?

21/10/2023

Home | News & Insights How to calculate true APR/APY? Today we’re gonna talk about two important metrics – APR and APY. We’ll go over what they are, how and when to calculate them, and most importantly, how to use them to make smart farming decisions. Because let’s face it, when it comes to farming, it’s all about those “percentages”! Table of Content: Base. What is APR and APY? APR and APY are widely used in DeFi to help us understand the potential return we can earn by providing liquidity. Both metrics represent annual interest rates and are essentially forward-looking metrics. They are useful for predicting the potential returns we can earn from various investments. Here’s what each of them means: APR (Annual Percentage Rate) is the annual interest rate that is applied to the invested assets. APY (Annual Percentage Yield) is the annual interest rate that is applied to the invested assets, taking into account compound interest and other factors that affect the overall return. Calculating APR (Annual Percentage Rate) This is a basic metric for evaluating the profitability of a liquidity pool/asset/strategy. The main feature when calculating APR in DeFi is the strong fluctuations in parameters that affect profitability (TVL, volumes, fees, rewards per block, etc.). Therefore, sometimes to understand the “fairness” of APR, we need to look at the dynamics of these parameters. Calculating APY (Annual Percentage Yield) APY can be thought of as APR with a compounding function. This metric shows us the annual return taking into account reinvestment of the earned interest. It can be calculated differently from project to project. However, if you know your APR, you can easily calculate your APY. In summary, the difference can be presented as follows: What you need to understand about APR and APY: 1. APR and APY are calculated based on historical averaged data. In such a volatile market like crypto, extreme values can lead to statistical errors. In just one day, we can see pool volumes increase by hundreds or thousands of times, while the next day everything returns to previous values. Take a look at the screenshot of such a vault. 2. APR/APY are manipulative metrics in DeFi, with no standard for their calculation. Protocols are naturally interested in showing a high percentage. What tricks could be used in their calculation? 3. APR and APY are measures of profitability that do not take into account changes in the value of the underlying asset. Therefore, it is easy to see high APRs but suffer losses from a decrease in the value of LP tokens/tokens. But despite the fact that APR/APY have their peculiarities in DeFi and can significantly overestimate expectations, they still give us an understanding of the product’s profitability. Calculating the “true” APR/APY In reality, there is no “true” APR and APY. Any approach to calculating these metrics will be a simulation of future profitability. However, by delving into the model of generating profitability for a particular pool, you can choose a suitable approach to calculate these metrics – and this will be the most “true” APR/APY for you, as it will take into account your specific strategy parameters. Calculator APR/APY We have created a simple calculator for you in the form of a Google Sheet, which will help you calculate what income you can expect from different pools with various parameters. In it, you can also calculate the result with top-ups.Just make a copy of the table and use it👇 Leechprotocol | Calculator APR/APY What should you do next? Share: Twitter Facebook Telegram

The history of farming and major problem

21/10/2023

Home | News & Insights The history of farming and major problem The Journey of Farming was started in the summer of 2020 from a few DeFi projects, like Synthetix, Compound, Yearn Finance… But all this started early before. All major players like Yarn Finance, YAM, and SushiSwap were launched during the DeFi Summer. The history of farming and major Problem To learn more about the history of farming and DeFI, please check this video. The problems of farming “liquidity mining” By creating farming incentivization or “liquidity mining programs” protocols printing their GOV tokens, and giving them as a reward to liquidity providers. As a result, we see more and more new GOV tokens on the market, significantly lowering the price. As an essential part of Farming, liquidity mining is an Inflationary mechanic in the protocol tokenomics. Healthy tokenomics Healthy tokenomics should have deflationary and Inflationary mechanics. By using both of them, the protocol can have a part of control over their GOV token price. In tokenomics, deflationary and inflationary mechanics refer to managing a token supply. Deflationary mechanics are designed to reduce the supply of a token over time. This can be achieved through various means, such as burning tokens (permanently removing them from circulation) or using a portion of transaction fees to buy back and retire tokens. Deflationary mechanics are intended to increase the value of a token by making it more scarce. Inflationary mechanics, on the other hand, are designed to increase the supply of a cryptocurrency over time. This can be achieved through various means, such as issuing new tokens (Farming) or using a portion of transaction fees to fund the development of the cryptocurrency. Inflationary mechanics are intended to increase the liquidity of a cryptocurrency and make it more widely available. Deflationary and inflationary mechanics can have a significant impact on the value of a token. Deflationary mechanics can increase the value of a cryptocurrency by making it more scarce, while inflationary mechanics can decrease the value of a cryptocurrency by increasing the supply. It is essential to carefully consider the implications of these mechanics before investing in a GOV token. What should you do next? Share: Twitter Facebook Telegram

Velodrome Yield Farming Research

21/10/2023

Home | News & Insights Velodrome Yield Farming Research Research Summary About Velodrome The Velodrome-AMM DEX provides swaps with deep liquidity and low slippage. In other words, it gives us the opportunity to trade crypto with less slippage, meaning we get better prices. According to Defilama, the project has existed for less than a year, but has already become a central figure in the Optimism ecosystem, and seen a 4x increase in its TVL. Social Media: Documentation: Velodrome Finance distributes rewards using the same two tokens that you provide to the liquidity pool, plus $VELO. Trading commissions for these pools range from 0.02% to 0.05%, and the $VELO rewards depend on governance votes. The Optimal Deposit Amount & Token Type This giant in the Optimism ecosystem can benefit us not only with its large TVL, but also with its excellent set of farming tools. Here, we can start farming with as little as $500, up to $20,000. As always, risk management is one of the most important aspects of any strategy. For this research, we have chosen the sAMM-USD+/LUSD pool, where we are ready to deposit our stables ourselves. Due to the fact that this pool only consist of stable assets, we eliminate the risk of Impermanent Loss. This pool consists of entirely super collateralized stables. LUSD is a stablecoin on the ETH network, requiring 110% ETH collateral to mint. LUSD Information: Social Media: USD+ is a stablecoin on the Ethereum network which is 100% backed by a delta neutral strategy on various DeFi platforms. Why do we call this stable a tool? Users can use it to generate returns with the OVERNIGHT protocol. Here, the TVL represents the amount of USD+ in circulation. USD+ Information: Social Media: Velodrome APR This platform makes it possible to earn such high APRs due to the fact that it is the central index of the ecosystem. Most of the liquidity in Optimism goes through Velodrome As we utilize our funds in liquidity pools, the project earns revenue alongside us, by charging commissions for each transaction. Why does the project share earnings with us? In order for the project to function properly, a significant amount of liquidity is required. Without liquidity, no one could trade, and the project would die. In order to incentivize liquidity providers, the project shares a percentage of its revenue. Conclusion: The project generates profits through our involvement, and we also benefit financially. Commission Statistics Velodrome Profitability Approximate yield for a $20,000 deposit: For many, this profitability is not amazing, but it is always a good idea to diversify your funds among reliable stables.. Step By Step Instructions: If your stables are already in your wallet: Entry & Exit Costs (for $20,000) Sign in with KuCoin: Approximate costs: $20 to $25 If your stables are already in your wallet: Approximate costs: $16 to $52 Approximate payback time: 2.5 to 12+ days, depending on your method of entry, as well as your deposit size. Note: We swap from USDC to LUSD and USD+ on Velodrome due to those pairs having high liquidity and thus small price impact on large swaps. The bigger your deposit, the more important this is. Before withdrawing USDC, you can look at the price impact on the swaps, and choose a different initial stable if you will get a better swap rate. Risks Don’t forget that risks are multiplied in Defi, so keep a watchful eye on your positions. This research is brought to you by Leech Protocol Team and Degen Hustle researchers What should you do next? Share: Twitter Facebook Telegram