As early as June, we wondered if the era of DeFi revenue is gone forever?
At first glance, this appears to be the case. DeFi yields continue to compress as tokens release value and risk appetite plummets. Gone is the crazy bull run of triple-digit yields, as stablecoin deposits on Ethereum Aave and Compound have lower rates than Treasury bonds. But if you look in the right place, there are still plenty of opportunities.
With liquidity mining incentives falling out of fashion due to a tightening cryptocurrency market, yield farming miners are now turning to generating revenue from more sustainable sources that generate real transaction fees or lending via market-proven protocols. interest, thus giving birth to a new narrative of “true gain”.
While these opportunities require miners to take on a higher level of risk commensurate with the higher returns, they are still a way for DeFi users to make money by investing their capital during this bear market.
Let’s analyze a few of the best opportunities for ETH, BTC and stablecoins.
- Network: Arbitrum, Avalanche
- Assets: ETH, wBTC, USDC, DAI, USDT, FRAX
- Risk: Intermediate
- Yield: 22%-29%
GMX is a decentralized perpetual contract trading platform. The protocol employs a unique model where users can become counterparties to traders on DEXs by providing liquidity to a basket of assets. This pool is called GLP.
The GLP pool is primarily composed of ETH, wBTC, and stablecoins, and is designed to provide liquidity providers with exponential exposure.
In order to open a position on GMX, traders need to borrow from GLP, with borrowing fees replacing traditional funding rates. This fee, along with fees incurred by traders opening positions, liquidations and swaps, is paid 70/30 to GLP holders and GMX stakers in the form of ETH or AVAX.
Currently, GLP has $348.8 million in assets deployed on the Arbiturm and Avalanche protocols.
To earn on GMX, users can provide liquidity to GLP.
The pool currently expects an ETH Annual Rate (APR) of 29.4% on Arbitrum and an AVAX Annual Rate (APR) of 22.54% on Avalanche.
On Avalanche, GLP holders can further increase their returns through esGMX rewards, which are 1-year GMX tokens that can be obtained through the protocol called MP Points (Multiplier Points, which can be obtained with the same native token procedures as GMX) fee income) to get higher rewards.
GLP liquidity providers are primarily exposed to two protocol-specific risks.
The first is inventory risk, as liquidity providers are exposed to fluctuations in the price of assets in the pool. The second risk is the trader’s profit and loss risk. As mentioned earlier, GLP is the counterparty to traders on GMX. This means that if traders make huge profits, especially by shorting, part of GLP’s funds may be drained, resulting in heavy losses for liquidity providers.
2. Hop Protocol
- Network: Ethereum, Arbitrum, Optimism, Polygon, Gnosis Chain
- Assets: ETH, USDC, USDT, DAI
- Risk: Intermediate
- Yield: 6%-8%
Hop is a cross-chain liquidity network.
Hop allows users to transfer assets between Ethereum and L2s (like Arbitrum, Optimism) in minutes, bypassing the 7-day withdrawal delay of Optimistic rollups.
The protocol achieves this through the AMM automated market maker, using an intermediate token (hToken) to facilitate the exchange between standard assets, which are assets issued natively by L1 or L2.
Each hToken represents recourse to the real assets deposited into Hop by the liquidity provider, and like a typical AMM, the liquidity provider earns a transaction fee for each transfer processed by the network. To date, the protocol has facilitated $2.7 billion in cross-chain transactions.
HOP has several different pools for users to provide ETH, USDC, DAI, USDT or MATIC liquidity to it.
As of now, the highest yielding pools are the ETH pool on Optimism (8.5% APR APR) and the USDC pool on Arbitrum (6.8% APR APR).
HOP is considering launching a liquidity mining project that will further improve returns for liquidity providers – keep an eye out for their dynamic updates on the governance forum.
HOP liquidity providers take on a variety of risks. The first is price risk, as users are exposed to the risk of price fluctuations in the underlying assets for which they provide liquidity.
The second risk is network risk, as liquidity providers on HOP are exposed to the security risks of all the underlying L1 and L2 they are connected to. Liquidity provider funds are at risk if any of these networks are attacked or suffer any serious problems.
- Network: Ethereum, Solana
- Assets: ETH, USDC
- Risk: Medium/Advanced
- Yield: 5%-7%
Maple is a low-mortgage lending platform. Maple enables institutions such as market makers or VCs to make low-value mortgages through separate lending pools. These pools are managed by an entity called a pool delegate, which assesses borrowers’ credit reliability risk.
With the capital pool, any user or whitelisted address can lend USDC or ETH to obtain loan interest and MPL rewards. To date, Maple has disbursed $1.6 billion in loans.
Some pools on the platform are permissioned, and some are currently open to public deposits.
These include the USDC and wETH pools managed by Maven 11, which currently have annual APY returns of 7.7% and 5.3%, respectively, and Orthogonal Trading’s USDC pool, whose depositors earn an APY annual return of 7.9%.
Of the three, on a risk-adjusted basis, the Maven 11 USDC pool is probably the most attractive as it has the highest coverage ratio (value of assets secured by the pool relative to outstanding debt), up to 8.6%.
Maple lenders take on liquidity risk, as depositors from the three aforementioned pools will have a 90-day lock-up period during which they cannot withdraw their funds. In addition, users are subject to credit risk, as the counterparty to the pool may be unable to repay the loan.
Given that borrowers’ books are not entirely on-chain, lenders must trust pool representatives to properly assess credit risk.
- Network: Ethereum
- Asset: USDC
- Risk: Advanced
- Yield: 17%-25% APY
Goldfinch is a credit agreement.
While Maple is focused on giving native crypto institutions access to on-chain capital, Goldfinch aims to do the same for real-world businesses that are able to use the protocol to access credit to help finance their operations.
Goldfinch provides liquidity through a tiered system in which users can provide liquidity to senior pools or individual junior pools. The key difference between the two is that senior pool deposits are spread across all pools on the platform, while junior pools represent only loans made to individual borrowers.
The junior pool has a lower priority than the senior pool, which means that if the borrower defaults, senior pool depositors will be paid before junior pool depositors. Goldfinch currently has $99.2 million in active loans across 12 active pools on its platform.
Currently only one primary pool – the Africa Innovation Pool – accepts deposits.
Users can lend funds to Cairus, an emerging market credit company, through this pool. The pool currently has an annual APY return of 25.3%, and the income is composed of 17.0% USDC loan interest and 8.3% GFI reward.
The Premium Pool also accepts deposits with yields constituting USDC loan interest and GFI rewards of 14.6% Annual Return (APY).
Goldfinch lenders should be aware that there are several important risks, such as credit risk, which could put lender funds at risk if borrowers default on their loan repayments, especially depositors of junior pools. In addition, junior pool lenders also take on certain liquidity risks. The tokens they receive, FIDU, represent recourse against their USDC collateral and can be redeemed through the senior pool. If there is insufficient liquidity available for redemption, the lender may Unable to exit its position.
Let’s focus on a few more opportunities for DeFi users to earn non-release gains.
Notional Finance (4%-7% APY) : On Notional, users can get loan interest through fixed-rate loans such as ETH, wBTC, USDC, and DAI, and the annual APY rate of return is between 4%-7%.
Sherlock (5%-28% APR) : Users can obtain up to 28.7% of USDC by providing protection, that is, staking guarantees for protocols audited by the Sherlock network.
Yield farming remains
As we have seen, through protocols like GMX, Hop, Maple, and Goldfinch, there are many opportunities for risk-tolerant DeFi users to earn above-market rates. With most of these gains not coming from token releases, these protocols are likely to sustain high returns for the foreseeable future.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/several-real-income-defi-recommendations/
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