What is Yield Farming: Degen vs Quality
Hello anons and friends!
We want to take a brief moment to thank you for your subscriptions thus far, the initial launch has far exceeded our own expectations and the amount of collective brainpower in the discord (paid subs only) has the makings of an extremely strong community. This is the last free post for awhile, after this we’ll move to more actionable analyses like protocol breakdowns, whale watching techniques, and Industry AMA’s (for Founders) in the Discord
Our first two articles covered investing philosophy and decision frameworks for liquidity providing and evaluating the pro / cons of Impermanent loss. We were gently reminded by the community that experience levels vary so we’re going to take a quick step back and 1) describe yield farming conceptually, 2) Different types of farming available to you, and 3) rules to keep you safe.
Tl;dr Summary of Yield Farming:
User Perspective: In exchange for participating in a protocol, farming allows for yield generation on what would otherwise be unproductive assets. Instead of holding ETH, BTC, or alts and hoping for price appreciation yield farming provides both the upside of price appreciation with the added benefit of additional income.
Protocol Perspective: New and growing protocols need to disperse liquidity (so that their tokens can be traded with large size) and reward early users of the protocols in the hopes that they become a community that propels the project forward. They distribute token to users for value-added services like 1) Staking tokens for governance rights, 2) providing trading liquidity to the market (LP), or 3) Airdropping tokens to early users (literally money falling from the sky). This is by no means an exhaustive list but you get the picture.
What is degen yield farming?
Farming that is very far out on the risk curve, but potentially very high reward. (Potential rug also). There is no reason for the token to exists outside the fact it does exists and is memeable. Extreme danger, but with a thrill.
A few characteristics that make up a degen farm:
Extremely high incentive APR (100,000%+) at the moment of launch
Little to no documentation on the protocol or project team
Little to no social media presence (inside info is key)
No code audits or code audits from groups without any reputation
Degen farming and getting rugged go hand in hand. It is part of the game. Some would argue even a rite of passage in crypto. The risks are high but so are the rewards. The Left Curve team knows people personally who turned $25,000 in $125,000 in 8 hours in the legendary degen farm, MALT, by aping in 11 minutes after.
98% of everyone else went to zero. Degen Yield farming is a game of chicken, with farmers accumulating intrinsically worthless tokens at a staggeringly fast rate while seeing who is going to sell first.
If you want better odds when degen farming, there are a couple things to keep in mind.
You need to be early on the farm. Ideally at launch.
Size your risk capital appropriately. Money that can go to 0.
The reward token must be memeable in some way.
Left Curve Rule: Remove your principal at a 2X and leave the rest farming for a 5-10X.
In the end, it comes down to a game of chicken. Dump or be dumped on. This is unfettered capitalism, Gary Gensler and the SEC are not coming to save you. That's why you have to be early!
Be plugged into all the social media regarding the project (usually discord and twitter). Filter for any information that signals a potential issue or rug.
From current price action, $nyan has been left for dead at ~$0.037 currently. We had an entry at roughly $1.10 and exited at roughly $5.75. ( Also farming pool 2 for 30k+ apy!)
Contributing factors that made this an awesome Degen farm:
1) It was one of the first degen farms on arbitrum (~2 weeks after arbitrum launch).
2) Meme factor with extremely high apy and NYAN cat meme.
3) High profile crypto twitter influencers joined the discord and shilled the project to followers.
Looking at the chart now, it's pretty much a dead coin. Don't be emotional over tokens you made money on. Sell at 2x and let it ride. Keep a moonbag if you like but mark it down to zero.
Now that you have a basic understanding of degen farming, let's move on to blue chip/quality farming.
What is quality yield farming?
Farming that is lower on the risk curve but with good potential rewards. (Low probability of rug)
A few factors that make up a quality farm:
Project founder and team is reputable with well known backers/strong investors.
The project has a strong vision or path forward. Solving a real problem in crypto or a novel concept.
Audits conducted from reputable firms and code issues are being addressed.
Strong social media presence or plan to scale media outreach.
The team, at minimum, has a multi-sig set up for treasury
Website knowledge base/ documentation is maintained and up to date.
Sustainable APR token incentives (usually less than 1000%) or planned reduction.
Even a quality farm has some risk. Smart contract risk, risk of hack, large holders dumping, etc. This is crypto and part of the game.
To succeed with quality farms some factors from degen farming still apply:
You still want to be early. Many times at launch APR is the highest.
Meme factor is still relevant
High profile crypto twitter influencers being involved is always a plus.
Additionally, the team should release consistent updates regarding the progress of the roadmap and a strong community that develops around the project.
Fanatical holders and borderline cultish communities are a bullish sign.
Quality farms lead to a better quality of life. There is less stress in quality farms and you can be hands off with your farm for a longer period of time. The returns are very good too!
This project checks most of the boxes for a quality farm:
Backers: (No more explanation needed here!)
Well known founder on CT:
Diamond Pepe memes:
In addition to this, Dopex is tackling a large untapped market since decentralized options have not been fully developed in crypto and there were fantastic initial farming rewards at launch.
(2X bonus rewards post token sale ~600% APR on DPX-ETH pool)
Regular updates to the community via discord and medium.
So anon, will you sit comfy in a quality farm? Or ape in for the rush of max gains in a degen farm...the rest is up to you...as always stay Left Curve.
If you have friends on the middle of the curve, send this to them to help them slide down to the left/right.
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are *opinions* written by anonymous cartoon villains for educational purposes.
Thx, good read.
Great stuff sirs