Where it Pays Off to Hang Around
Overview of a Yield Farming Protocol
A New DeFi Project With a Twist — The Benefits for Sticking Around
The YELD DeFi protocol requires that one invest in stablecoins in order to participate in the liquidity pool and stake
How Does it Make Me Money?
Profits will increase along with the value of their smart token. The team at YELD is expecting to generate a yield from profits derived from transaction fees and borrowing fees that are derived from a constantly rebalancing portfolio that includes Compound, Aave, Fulcrum, and others.
Classically, DeFi yield farmers stake tokens, realize fees, farm some tokens, unstake their position, and exit the liquidity pool — to yield and farm somewhere else. As with any other DeFi yield-farming project, when someone un-stakes from YELD their stable coin will be returned along with a Smart Token equivalent to a yielded YELD coin.
When THEY Leave We Get Value?
YELD has a lot going on, specifically a special process that increases the value of the yield they deliver. This is the YELD “buy and burn” process — something that only takes place when a liquidity pool provider withdraws their liquidity from the Liquidity Pool.
“Buy & Burn”
At un-staking, a percentage of the yield generated from staking stable coins is used to purchase YELD on Uniswap. Those Uniswap purchases decrease the number of tokens in the liquidity pool and increase the price of YELD. That’s the “buy” part of the equation.
The smart contract then “burns” those tokens by sending them to a nonrecoverable address on the blockchain. This reduces the number of tokens in circulation, thereby increasing the price. YELD has a stated goal to reduce the number of tokens in circulation from 60,000 to 10,000 via this process.
What is important to remember is that the increase in price and decrease in supply only benefits those who remain staked.
Retire & Give Us Ethereum
Another innovation from YELD is that in addition to yielding a coin YELD rewards its stakeholders who remain in the protocol with Ethereum. When any investor un stakes their position from YELD 1% of the yield is used to buy Ethereum.
These proceeds are placed in their Retirement Yield Treasury Smart Contract — available only to the liquidity providers who remain staked in YELD. The phrase retirement indicates that the funds are extracted from those that “retire” from staking.
After holding staked funds for a minimum of one day, staked liquidity pool providers can tap a snapshot yield balance button and the YELD Dapp. The snapshot triggers a comparison report. The report compares the staked liquidity provider’s staked balance today versus their staked balance from the previous day.
If the difference is equal to or greater than it was the day before, the stakeholder earns a portion of the Ethereum equivalent to their participation in the pool.
If the difference is less than it was the day before — meaning that you’ve reduced your staked value in YELD, then you are not eligible to earn Ethereum, today.
If the calculated value is greater than or equal to what it was yesterday, that Ethereum can be moved into your wallet without ever having to unstake.
Currently — in October of 2020 — the price of Ethereum is a bit more than USD $349. If the prices increase to even near 2018 pricing levels for Ethereum, this payoff could be even more attractive than it is today.
Yield-Leave vs. Yield-Stay
The question this review raised for us was whether there was a sufficient “supply” of both yield leave and yield stay investors. We concluded that while the yield-stay population has legs, the market has a way to go before it evolves from a majority yield-leave investor.
The buy and burn and retirement smart contract strategies will play an important role in evolving DeFi investors into “buy and hold” participants in their liquidity pool. We will continue to watch this Protocol as it rolls out its Yielding Dapp in early October. As of this writing, one can only purchase the token on Uniswap.
This is not investment advice. We’re simply giving you our take on this DeFi protocol. Enjoy and have a great rest of your day.