As a fellow humble farmer, an old timer in the space, I come to you with a couple of ideas that I think warrant further discussion and scrutiny from the harvest community and team. I have come across many projects that have come and gone since the days of Peercoin, Mastercoin and bunch of other failed but interesting projects. I have been really impressed with what the Harvest team and community has achieved to date in such a short period of time!
As a farm token holder, the aim of my proposals is to increase the utility and dividends of the Farm token by boosting platform TVL in a sustainable manner without having to dilute farm token holders in doing so! This will be done in two ways:
Allow LPs to borrow/leverage against their interest bearing Ftoken deposits
Imagine being able to borrow stablecoins against the WETH-BTC UNI LP Pair on Harvest. These stablecoins would be used to by more WETH-BTC UNI LP tokens to deposit onto the Harvest platform. Increasing TVL and Profits. Given the performances of the Harvests vaults, your underlying collateral would grow at a faster rate than the underlying debt. In effect the returns of the vault could be used to pay off the debt over time without ever having to repay the debt yourself! Think of it as a Leveraged Vault that pays its debt of over time.
Farm as a Service (FaaS) and the Harvest Farmers Market, allow newer legitimate less trusted projects to launch yield farms through Harvest.Finance (FaaS), allowing them to leverage harvests audited vaults and generate a real return on idle farmer deposits. These funds can be used to bring real world value to the new project’s governance token. Whether they want to raise funds for further protocol development, add an insurance fund or a yielding treasury vault that tethers their governance token against a real world asset (USD, BTC, ETH) creating a price floor for the token. Additionally, Harvest Finance would handle depositor funds (custody), preventing rug pulls and allowing them to benefit from Harvests growing reputation as the most secure place on the internet to farm yield. Imagine another tab on Harvest.finance in between the Stake and FAQ tabs showing farmers all of the tokens they can mine through harvest without exposing their base capital to any additional risk (as farmers base capital will be held in ftokens). See below for more detailed explanation.
In order for harvest finance to continue to grow, mature and harvest bountiful crops for all the humble farmers around the world, harvest as a one of the pioneers and leaders in the yf space, has a unique opportunity to be the first to address many of these problems and maintain its position, as the go to place for yield farming on the internet.
Some of the current challenges and yield farming trends my proposal aims to address:
• A shift to Liquidity mine with more stable assets (USDC, BTC, ETH, WETH-BTC etc) limiting price volatility and exposure to riskier assets (Sushi, Ample, Value)
• The increasing abundance of rug pulls, hackers and scammers are making it harder for legitimate to build up enough trust to bootstrap a global network.
• Even though it attracts a lot of TVL, Inefficient and Ineffective use of idle single asset yield farms like YFV Seed Pool 2 incentivize the dumping of native farmed gov tokens to cover the cost of gas and inflation, whilst providing no real use or utility for the project. This causes a downward pressure on prices that generally kickstart a race to the bottom, as farmers try to reduce risk by locking in their APY gains. Given the success of these pools to attract TVL, these pools have remained pretty divisive within the yield farming community.
• Race to dump coin ends up draining all ETH from Pool 2s hurting the most loyal token holders
• Avoiding Emissions cliffs, falling APYs, LP Capital flight death spiral and future vampire attacks.
Currently, I have deposited USDC in the Farm USDC pool. The APY is around 22% (4.5% curve APY + 17.5% APY) making it the best USDC single asset deposit farm in the space in my opinion. However if we were to remove the Farm token incentive, my effective APY would fall to 4.5% ( >75% reduction in yields) making it noncompetitive against most other yield farms.
The importance of the token incentives cannot be overstated on a global public network with little friction. The willingness of farmers to leave in search for higher yields will come if yields fall too low. Harvest have built an edge by responding to new yield farming opportunities quicker than their competitors, capturing more Alpha. By finding additional ways to attract and boost yielding deposits on Harvest in a sustainable manner, we will reduce our dependence on Farm token rewards to boost APY.
Sushiswap demonstrated the power of token incentives this by performing a vampire attack on Uniswap, which forced Uniswap in turn to launch their own governance/token incentive to counter sushi and ward off any other potential vampire attacks.
As the Farmers Collective grows, its increasing TVL becomes more and more of a target and lure for potential liquidity attackers. This is further exacerbated by Farm emission reductions, making the farm collective more vulnerable (over time as the farm token incentive reduces) to a liquidity attack.
We can solve these problems by implementing two solutions:
“Farms as a Service” and the “Farmers Market”
Single asset deposit or LP yield farms as a service, that require you to deposit a stable asset to farm the native token have been very successful at attracting a large amount of capital.
The funds just sit their idle, so there is no risk of impermanent loss and a great way for projects to boost their TVL and distribute their native governance token. However, they do not use or utilize the underlying funds that have been deposited, exposing farmers to inflation and gas costs whenever they deposit into these contracts. This in turn incentivizes the farmer to sell at least some of the native gov tokens to cover the cost of farming.
I will use the YFV Seed 2 USD Stablecoin pool as an example.
The USD Seed Pool 2 has attracted and maintained $50-$100 million TVL since YFV.finance/valuedefi.io launched it. These funds were not used and sat their idle for months getting debased by FED inflation. Forcing farmers to sell YFV/Value to generate a real return. Instead they could have generated millions in interest for depositors and Value Defi protocol during that time.
Under my proposal, FaaS would allow new projects to directly attach their yield farms to Harvests Vaults, allowing farmers to generate a real return on their underlying assets whilst farming the native governance token of projects they like. Given that Harvest autonomously harvest yields and locks in gains, farmers of the Farmer Market would not have to sell to the gov token to generate a real return and protect themselves against inflation or gas costs. The funds would be deposited directly into the Harvest Finance base Vaults (USDC, USDT, DAI, TUSD, WBTC, WETH, UNI Pairs etc) locking in gains for farmers on a daily basis.
Under my proposal 30% of all profit will be deposited in the profit share pool. The remaining 70% would be split between the protocol (they only funds that would be at risk of misuse is the % of yield profit going to the protocol) and vault depositors (protect against inflation and gas costs) per the terms of the farm.
If a project was deemed to be very important and beneficial to have on the Farmers Market, Harvest could opt to add an additional incentive. Creating a triple farming reward, by providing 3 different revenue sources for depositors.
- Base Asset Yield Farming reward = Uni/Crv tokens which will be sold off for the base asset and divided between the LP, Protocol Farm profit share
- Native governance token will be distributed to farmers as the main incentive
- Harvest Finance could provide a small Farm incentive to bootstrap these pools as they would generate fees for farm holders
In conclusion FaaS would be used to attract LPs and boost Farm yields without having to incentivize them with additional Farm tokens, as the native governance token of the protocol being farmed will provide that main APY incentive. This allows Farm Vault LPs to farm new projects without gaining custodial exposure to new, unproven and unaudited projects, as the funds will remain on the Harvest.Finance platform. The % of profit generated on vaults sent to project listed on the Farmers Market could even be subject to certain criteria and objectives before the Farm Team would release funds. More to come tomorrow
Cheers to fellow farmers that took the time to read this, any critical feedback would be helpful.