Cryptocurrency: DeFi, Farming, and Staking Megathread

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There's more to crypto than simply aping in to random dogcoins like a goddamn degenerate. Some of these chains (not the dogcoins) actually have decentralized applications that can generate returns. In other words, you can actually use the damn things to make yourself money.

This thread will discuss basics of defi, farming, and staking, and then likely devolve over dozens of pages into specific strategy discussions plus the standard erBB litany of complaining about surf conditions and gay code.

Not financial advice. Do your own research. Strap in, let's go.

 

[Chee-to]

1. A DeFi Primer

DeFi = decentralized finance.

Traditional finance is where you give your money to some dude to generate a return on it. You might stick it in a bank and get interest on your deposit, or give it to a stock broker or clearing house and generate market returns.

Decentralized finance is where you run your own money through smart contract platforms to generate the return with no centralized intermediary. Anyone with the token that the smart contract takes can anonymously interact with the contract to use it.

There are risks involved - the smart contract may be a "rug pull" and simply take the money deposited in it, or poorly coded so that hackers can exploit it, or the tokens involved may drop substantially in value. You are your own bank with DeFi. There is no safety net. You need to do your own research on the protocols you use and where your money is going.

The Major Players - Chains and Tokens Involved.

Defi can exist on any blockchain that allows smart contract usage, but most of it occurs on a few chains with the lion's share of development. Those are:

Ethereum Virtual Machine chains
Ethereum - ETH
Binance Smart Chain - BNB
Polygon - MATIC
Fantom - FTM
Avalanche - AVAX

Non-EVM chains
Solana - SOL
Terra - LUNA and UST*
Tezos - XTZ

EVM chains all have the same basic functionality. Once you learn how to use EVM chains, and learn how to add new EVM chains to your wallet, the steps will be substantially the same for each.

The Tokens
Each of the above chains has a native token that functions as the "gas" method for paying the fee to publish transactions to the chain itself, which allows you to interact with the smart contract. For instance, to interact with an Ethereum smart contract, you have to pay ETH to the blockchain itself.

The native tokens used for gas for each chain are listed by it. The exception is Terra. Projects use either LUNA or UST as gas on Terra depending on the project.

The other major tokens that are crucial to Defi are stablecoins. These are tokenized versions of US dollars that exist on blockchains, and generally across multiple blockchains:

USDC - Developed by Circle, which I think is an offshoot or associate of Coinbase. Coinbase Pro will convert USD to USDC for free. Generally recognized as safe. Backed by actual deposits.
USDT - Tether. The oldest stablecoin around and a source of much FUD, but also GRAS. Backed by actual deposits, but maybe not fully collateralized or with great deposits.
DAI - A stablecoin overseen by a digital autonomous organization, or DAO. Long time in crypto, GRAS.
BUSD - Binance's stablecoin. GRAS, backed by deposits.
UST - Terra's native algorithmic USD stable coin. Backed by minting and burning LUNA. Algo stables have a terrible track record, except for UST. I consider it fairly safe.
MAI, PAI, USDtz, IRON, etc. - Other stablecoins will pop up from time to time. Some will fail, some won't. Tread carefully.

 

[casa_mugrienta]

Tulip forum.

 

[Chee-to]

Getting Started - Wallets and Wallet Clients.

To get started, you need a method of getting fiat into crypto and wallets on the chains you want to use. For Americans, I suggest Coinbase Pro as a fiat onramp. For everybody, I suggest a Ledger hardware wallet [https://www.ledger.com/] to interact with the wallet clients. Buy two and back them up with the same seed phrase. Buy them ONLY from Ledger directly and ONLY new.

Ledger is a hardware wallet that holds your seed phrases (account codes) and signs transactions for you. To use Ledger, you need to connect it to a wallet client on each chain.

You can use the wallet clients directly without a hardware wallet, but it is not as secure. If you do this, you will need to back up the wallet client's seed phrase instead of the Ledger's.

There are several wallet clients for each chain, but here are my recommendations based on use.

Wallet Clients

All EVM Chains (ETH, BSC, MATIC, etc.) - Metamask https://metamask.io/
Solana - Phantom https://phantom.app/
Terra - Terra Station (not great, but I haven't seen a better option yet) https://station.terra.money/wallet
Tezos - Temple https://templewallet.com/

Download the browser extensions for each wallet. Plug in your Ledger, hit connect hardware wallet, and you have access to your hardware wallet addresses through the wallet client extension. For EVM chains, you will need to look up how to add the specific chain in Metamask for all the non-ETH chains. It's easy to do and find.

 

[grapedrink]

Getting Started - Wallets and Wallet Clients.

To get started, you need a method of getting fiat into crypto and wallets on the chains you want to use. For Americans, I suggest Coinbase Pro as a fiat onramp. For everybody, I suggest a Ledger hardware wallet [https://www.ledger.com/] to interact with the wallet clients. Buy two and back them up with the same seed phrase. Buy them ONLY from Ledger directly and ONLY new.

Ledger is a hardware wallet that holds your seed phrases (account codes) and signs transactions for you. To use Ledger, you need to connect it to a wallet client on each chain.

You can use the wallet clients directly without a hardware wallet, but it is not as secure. If you do this, you will need to back up the wallet client's seed phrase instead of the Ledger's.

There are several wallet clients for each chain, but here are my recommendations based on use.

Wallet Clients

All EVM Chains (ETH, BSC, MATIC, etc.) - Metamask https://metamask.io/
Solana - Phantom https://phantom.app/
Terra - Terra Station (not great, but I haven't seen a better option yet) https://station.terra.money/wallet
Tezos - Temple https://templewallet.com/

Download the browser extensions for each wallet. Plug in your Ledger, hit connect hardware wallet, and you have access to your hardware wallet addresses through the wallet client extension. For EVM chains, you will need to look up how to add the specific chain in Metamask for all the non-ETH chains. It's easy to do and find.

Am I screwed if I lose the password and/or QR code with any of these?

 

[casa_mugrienta]

I've found a way to use the emotions generated by my postings on the erBB to mine Bitcoin.

For instance, when mundus was flipping his sh!t over my posts a few months back I used a proprietary technique to mine 5 Bitcoin from his emotional response.

His emotions enabled me to buy 3 duplexes in Elmwood, Oklahoma.

Thank you @mundus.

 

[TheEl]

There's more to crypto than simply aping in to random dogcoins like a goddamn degenerate.

LIES

But seriously, thank you for taking the time to lay this out.

 

[Chee-to]

Am I screwed if I lose the password and/or QR code with any of these?

First off, there are both passwords to unlock your wallet client and seed phrases to regenerate them. If I'm running a wallet client on computer 1, I unlock it with my password. If I want to recreate it on computer 2, I have to put in the seed phrase, which rehashes and recreates my wallet. You can lose the password and it will be a pain in your ass. If you lose the seed phrase you're fucked...

UNLESS...

If you're running it through Ledger, it doesn't matter, because all the account seed phrases/etc are held on the Ledger. Let's say Ledger holds my EVM account with address 0xbassyjackbootsbanhammer. I can generate a billion different Metamask wallets, each with its own seed phrase, and simply import 0xbassyjackbootsbanhammer into any of them.

If you run the client off Ledger, you need to be sure that the account in the client you're using and funding is the Ledger account. Each of these, except Terra Station, allows multiple accounts. When you import an account, you will have two accounts at first: the wallet client "native" default account and the Ledger account you just imported. You can delete the native account and add more and more Ledger accounts.

If you lose your Ledgers and seed phrases, you're fucked.

 

[Chee-to]

The Basic Premise

The basic premise of Defi is that we're going to lend money or provide liquidity and get a return on it.

One way to do that is to deposit in a lending protocol. These will simply give you a return on a deposit, and will also allow you to borrow against those deposits. These tend to be lower return, although rates can go very high depending on how the markets are going.

Another way, and the most common, is to put money in an decentralized exchange liquidity pool. DEX LPs are ways to trade one token for another. You take an equal value of two different tokens, dump them in a pool together, and let any wallet address that interacts with it trade through the pool. The exchange rate is set by a simple function (Token A * Token B = constant) and arbitrage drives it back to the regular exchange rate.

Anybody that trades through the pool pays a small fee to do so, which the LP providers share.

For instance, a USDC/USDT pool trades USDC for USDT. If I have $10,000 in USDC and I need $10,000 in USDT, I simply exchange them through the pool.

You need to watch slippage as you trade and impermanent loss if you provide liquidity. Slippage is when the pool is imbalanced: if there's much more USDC in the pool and less USDT, then I'm not going to get 1:1 when I want to trade for USDT. Otherwise the pool would get drained. The bigger the trade, the more the potential slippage.

Impermanent loss is explained here. https://academy.binance.com/en/articles/impermanent-loss-explained

We can minimize impermanent loss by going into stablecoin pools, which is the main thrust of the strategies I discuss - stablecoins simply don't fluctuate enough relative to each other to create IL.

If you take one thing away from this thread, it's that most of what it's geared towards is depositing stablecoins in various protocols to generate returns with no market price risk.

The Other Piece Of The Puzzle - Farming Rewards

To get you to provide liquidity on their sites, many projects will pay rewards in their own native governance token (in addition to trading fees) to lenders/liquidity providers. These will be key to returns.

 

[Driftcoast]

Take it to the foil forum

 

[racer1]

Mahalo in advance.

 

[Chee-to]

Protocol-Specific Projects

Disclaimer: This is a new frontier of money. These change all the time. What I have listed here are protocols that I use. Better ones may pop up. I am a degen with a mostly work-from-home white collar computer job so I research this sh!t all the time, and I can barely keep up.

EVM

You can use the same wallet addresses across all EVM chains. It's better practice to use different ones for each project, but you will have the same set on each: if you have the ETH address 0xbassyjackbootsbanhammer, you will also have a BSC address 0xbassyjackbootsbanhammer, a MATIC address 0xbassyjackbootsbanhammer, etc.

Ethereum
Tons of Defi projects, but I don't use them, because gas fees are too high. However, most of the big names in the EVM space originally developed on ETH, so you'll see them throughout here - Curve, AAVE, Badger, Uniswap, Sushiswap. Most of what I use ETH for is bridging tokens to cheaper chains.

Because Coinbase Pro is the easiest US centralized exchange and will only let you withdraw USDC on ETH, it's the starting point to get money into most ecosystems.

Curve will get mentioned a lot - it's a gold standard project across multiple blockchains with good coding. Curve is designed as a low-slippage stablecoin pool for large transactions. Its native token is CRV, which has doubled recently.

BSC

How to get money onto and use BSC
Buy BNB for gas on Binance.us or Binance.com (Americans may be able to use through a VPN)
Install Metamask and add Binance Smart Chain protocol through instructions on binance.org
Bridge money from other chains via Binance Bridge (US use VPN), Anybridge, Allbridge, Wormhole, Terra Bridge, etc. Many options.
Transactions on BSC cost anywhere from a few cents to a few dollars, depending on complexity.

Protocols
PancakeSwap and MDEX are the main liquidity pool sites. BELT is a single-token lending and low-slippage stablecoin LP site. Beefy and Autofarm are autocompounders. Autocompounders work by harvesting the farming rewards, selling them off, and reinvesting the proceeds back into the pool.

One worthwhile stablecoin strategy:
-Deposit stablecoins in BELT's 4BELT pool, which is a USDC/USDT/DAI/BUSD pool. You will get 4BELT LP tokens that show your stake.
-Do not stake! If you stake, you will get paid rewards in BELT, which is essentially useless.
-Instead, deposit the 4BELT LP tokens into Beefy or Autofarm, which will autosell the BELT and reinvest.
This has historically returned 15-22% or so APY.

Polygon (MATIC)

How to get money on, use
MATIC is the token. You can get free MATIC to run a few transactions from MATIC faucets, so no need to buy right off the bat. You can also buy MATIC on exchanges.
Install MATIC Mainnet on Metamask.
Bridge money from ETH using the built-in Polygon Bridge https://wallet.polygon.technology/ or from other chains using third party bridges (Allbridge goes to SOL and BSC).

Protocols

Quickswap is the LP/exchange.
Curve is the most worthwhile player. You need to connect to polygon.curve.fi. Curve.fi is the ETH version. There's no link back and forth.

Two good pools on Polygon Curve:
aave is a stablecoin-only pool with USDC, USDT, and DAI. Returns have been in the 12-20% range.
atricrypto3 is a stablecoin/BTC/ETH pool. The advantage here is that you get hedged exposure to BTC and ETH as well as returns on the deposits. It's BTC/ETH/USDDC/USDT/DAI. Farming returns - not counting increases in BTC/ETH price - have been in the 18-35% range.
You can also deposit these into the Beefy or Autofarm autocompounders to sell the CRV and WMATIC rewards.

FTM and AVAX I haven't used enough to recommend anything.




Non-EVM


Solana

Getting money to, using Solana
Install Phantom wallet client.
Buy SOL on Coinbase Pro or other exchanges. A Solana transaction costs 0.000005 SOL, so you don't need much to get started.
Option 1: Bridge USDC, USDT, or UST to Solana through Wormhole from ETH/BSC/Terra. You can also bridge ETH/BNB/LUNA/BTC, Solana has support for a lot of wrapped tokens.
Option 2: Buy SOL on CBP, withdraw to Solana, swap on DEX for USDC (probably cheapest fiat to stablecoin on Solana route)

Projects:

Mango.markets has a single-token lending platform as well as other uses. You can deposit and borrow USDC, USDT, SOL, ETH, BTC, and other tokens. Interest rates vary wildly depending on the utilization curve of the asset. They go apeshit in the low 70s - that is, once about 70+% of the specific token is borrowed, rates climb very quickly. https://trade.mango.markets/stats shows the numbers.

Raydium is a combination interface to Serum, which is a decentralized exchange, plus a liquidity pool/farming project.

Saber and Mercurial have low-slippage stablecoin LPs with farming rewards. Rewards bounce around a lot on Saber, so you have to keep on top of it.

Sunny Aggregator is a autocompounder for Saber that also adds SUNNY tokens as an additional farming reward.


Terra

Getting money to, using
Install Terra Station wallet and extension
Buy LUNA on exchanges
Bridge UST from ETH or BSC using Terra Bridge or from Solana using Wormhole


Protocols
Terra is starting to explode, but has two main protocols leading the pack.

Anchor is a traditional bank-style deposit and earn protocol. It offers a steady interest rate that attempts to hit 20% APY on UST deposits. It hasn't hit 20% in a while, but it also hasn't gone below the high 17s and usually sits around 19.5%. You can also insure Anchor deposits for a fairly low rate, indicating that the crypto world considers it pretty safe.

Mirror is a tokenized "mirror world" stock platform where you can buy tokenized versions of blue-chip stocks and hold them onchain. You can farm the UST-stock pools on both the long and short side for rewards in the MIR native token. The long pools that I follow - NFLX, SPY, GOOG, COIN - tend to return farming rewards in the 20-30% range. You also have exposure to the underlying stock/fund. It's basically the equivalent of getting a dividend on a non-dividend stock.

Mirror and Anchor both use UST for gas. You don't actually need to hold LUNA to use either, although you do need LUNA to bridge money in and out or move it anywhere else.

Added Bonus!

Terra projects almost always airdrop free governance tokens to wallets that stake the native LUNA token for validation. An airdrop is just a giveaway of tokens. In other words, if you hold and stake LUNA, you get free money from other projects that are starting out.

 

[grapedrink]

Question: If some of vehicles are offering 10-30%+ returns, where is that money actually coming from?

 

[LifeOnMars]

Protocol-Specific Projects

Disclaimer: This is a new frontier of money. These change all the time. What I have listed here are protocols that I use. Better ones may pop up. I am a degen with a mostly work-from-home white collar computer job so I research this sh!t all the time, and I can barely keep up.
BSC

How to get money onto and use BSC
Buy BNB for gas on Binance.us or Binance.com (Americans may be able to use through a VPN)

if you have another passport that's not from the US yes, they make everyone KYC now to use the normal Binance.com site. Alternatively you can buy BNB (and many other coins) on Kucoin, no identity verification required. I also just signed up for OKcoin, looks like they're SF based. Could be a good on an off ramp for your greenbacks. OKcoin also accepting TR20 and ALGO USDC so you won't get raped by ETH fees when trying to cash out. Using the link below you'll get $50 in free BTC after buying $100 or more worth of crypto

Refer a friend to Okcoin

Okcoin referral program - invite your friends to register on our cryptocurrency exchange and you will both receive $50 worth of free BTC

www.okcoin.com

 

[LifeOnMars]

Question: If some of vehicles are offering 10-30%+ returns, where is that money actually coming from?

you can stake and get those rewards no problem, you're contributing to the validation of the network. stablecoins can offer 20% APY also

 

[Chee-to]

Question: If some of vehicles are offering 10-30%+ returns, where is that money actually coming from?

Depending on the project, two sources:

1. Trading or lending fees from actual use of the protocol. For single-token lending protocols, you're getting paid interest on a deposit like a bank account.

Example: On Mango Markets (Solana single-token lending platform) current deposit interest rates on USDC are 18.84%. These fluctuate constantly.

For LPs, you're getting your cut of the fees charged to people that trade through that pool.

Example: On most LPs, the protocol charges all swaps 0.3-0.4% of the swapped amount as a fee.

2. Farming rewards. These are the native governance tokens the projects throw in to sweeten the pot and attract capital.

Example: the Polygon Curve aave pool I mentioned earlier shows the following:

Pool	Base vAPY ?	Rewards tAPY ?	Volume▼	Balance	USD Profits CRV Profits	Claimable Tokens
aave USD aDAI-aUSDC-aUSDT	6.16%	+4.22% CRV +3.33% WMATIC

It's returning 6.16% in trading fees, plus 4.22% in CRV rewards, plus 3.33% in MATIC rewards, for a total return of 13.71%.

 

[Chee-to]

you can stake and get those rewards no problem, you're contributing to the validation of the network. stablecoins can offer 20% APY also

Staking is a different topic, but also one that can generate returns. Or airdrops - refer to the earlier writeup on Terra/LUNA.

 

[LifeOnMars]

Am I screwed if I lose the password and/or QR code with any of these?

your seed phrase or private key is the most important thing, lose it your funds are gone. anyone with the key can restore your wallet to their device and access your funds. keep it in a very safe place

 

[grapedrink]

Depending on the project, two sources:

1. Trading or lending fees from actual use of the protocol. For single-token lending protocols, you're getting paid interest on a deposit like a bank account.

Example: On Mango Markets (Solana single-token lending platform) current deposit interest rates on USDC are 18.84%. These fluctuate constantly.

For LPs, you're getting your cut of the fees charged to people that trade through that pool.

Example: On most LPs, the protocol charges all swaps 0.3-0.4% of the swapped amount as a fee.

2. Farming rewards. These are the native governance tokens the projects throw in to sweeten the pot and attract capital.

Example: the Polygon Curve aave pool I mentioned earlier shows the following:

Pool	Base vAPY ?	Rewards tAPY ?	Volume▼	Balance	USD Profits CRV Profits	Claimable Tokens
aave USD aDAI-aUSDC-aUSDT	6.16%	+4.22% CRV +3.33% WMATIC

It's returning 6.16% in trading fees, plus 4.22% in CRV rewards, plus 3.33% in MATIC rewards, for a total return of 13.71%.

OK, but who is borrowing at those insane rates?

 

[Chee-to]

OK, but who is borrowing at those insane rates?

For single-token lending protocols,

(a) people that are betting on or know they can get higher returns on it elsewhere. You see a lot of stablecoin funding rates go way up when leverage goes way up, which happens right before big jumps in token prices, especially when futures basis trades are insanely profitable. Other people want to jump into specific crazy farms that have temporarily high rates.

(b) people that were borrowing at cheaper rates and got caught not monitoring it when the rates changed suddenly.

(c) degenerate gamblers (see (a))

There's a fair amount of information asymmetry and irrationality in these markets. I was running a leveraged interest rate swap on Mango for over four days as an experiment. USDC deposit rates were in the high teens to 30s, and USDT borrow rates were in the low single digits. This makes NO sense, because you can trade USDC/USDT almost losslessly. So I deposited USDC, borrowed USDT, traded it for USDC, deposited that again, borrowed more USDT based on that deposit, rinse and repeat until I had levered up to 6+x my original deposit. That meant that as long as the delta between the rates was hanging in the 20% range, I was making 120% APR, although trade slippage cut that total down significantly.