This is a weekly tutorial on the most compelling opportunities in yield farming, written by our friend DeFi Dad, an advisor to The Defiant and Head of Marketing and Portfolio Support at Fourth Revolution Capital.
Disclaimer: All opinions expressed by DeFi Dad are solely his own opinion and do not reflect the opinion of 4RC or The Defiant. DeFi Dad disclosed he is in the Orion Saver stablecoin farm. He wishes to disclose this as he could benefit from future upside in an ORION token once it’s generated. This post is for informational purposes only and should not be relied upon as a basis for investment decisions. Please do not follow any opinion as a specific strategy.
Background on Protocol: A new DeFi protocol called Orion Money aims to build a cross-chain stablecoin bank for saving and lending. What’s clever about Orion is that it’s bridging demand from two different DeFi communities: the Anchor Rate available on Terra blockchain and the outsized amount of stablecoin liquidity and demand to earn yield on Ethereum. If you’re unfamiliar with the Anchor Rate, think of it as the target APY that Anchor protocol seeks to pay out to depositors of UST. This Anchor Rate isn’t fixed, but is designed to be stable, currently about 19.55% APY.
If you have a reliable source to earn a stable 19-20% yield on stablecoins on one blockchain (Terra) and a larger pool of stablecoin lenders on Ethereum, what happens when you bring the two together? Orion Money addresses this by allowing stablecoin lenders to remain on Ethereum, while lending one of many stablecoins such as DAI, USDC, and UST to earn with the Anchor Rate.
Here’s how it works:
- Orion users deposit ERC20 stablecoins on Ethereum (USDT, USDC, DAI, wrapped UST, FRAX, BUSD).
- Under the hood, Orion Money swaps the stablecoins for wrapped UST using curve.fi/ust and then bridges the wrapped UST to native UST on Terra. There are some higher gas fees to pay and potential slippage to impact anyone’s deposits/withdrawals.
- Lastly, the UST is used to earn the Anchor UST rate, currently at 19.55% APY.
I’m not sure there’s a better example today of cross-chain DeFi than this. Someone depositing stablecoins on Ethereum benefits from yield earned on Terra. Also, like most blue chip DeFi protocols on Ethereum, there’s cover already available at 2.6% APR for Orion deposits, thanks to InsurAce, or at least there was cover until it sold out recently.
Keep in mind, this is simply the first phase of a rollout to support lending stablecoins on Orion Money. Here’s a few milestones ahead:
- In September, the team will facilitate an IDO prior to token generation of ORION.
- Eventually after ORION is created, Orion users will have the option of being paid interest denominated in their deposited stablecoins or a higher interest rate in ORION.
- Additionally, any depositor can earn higher interest for staking ORION. When users stake more ORION, they earn a higher APY, similar to the model used by centralized crypto lenders Celsius and Nexo.
- Different from those CeFi lenders, all net revenue from Orion Money will end up in an ORION staking pool for ORION stakers.
Opportunity: Today, I will share how I can earn 16.5% APY with UST or 13.5% APY with DAI, USDC, USDT, BUSD, or FRAX.
Time to Complete: 10 minutes if paying the recommended FAST gas price or higher on gasnow.org.
Estimated Length of Rewards Program: These pools are only getting started. The rates will actually rise to between 15-25% APY after the ORION token is generated in September, following some future IDO. For now, the rates are fixed at 13.5% for all stablecoins or 16.5% APY for UST.
Gas + Protocol Fees: Based on gas prices between 30-60 Gwei on Ethereum, it should cost $40-$90 to participate.
Fees: Other than the usual Ethereum network fees you pay as gas, it’s worth noting that with Orion, users are paying for a convenience to not have to bridge money to Terra. For this service, Orion takes a cut. For example, I can earn 19.55% APY with the Anchor Rate but I’m earning 16.5% APY with UST on Orion. In the future, after ORION token is generated, these rates will rise to an expected 20-25% APY if I stake ORION and choose to be paid interest in ORION tokens. Also for withdrawing from Orion, be aware it involves a transfer between Terra and Ethereum handled by Terra Bridge (Shuttle) which imposes a fee of maximum of $1 or 0.1% of the total amount.
Risks: As always, this is not financial advice and you should do your own research. The following are risks when participating in this opportunity.
- Smart contract risk in Orion Money, Anchor, and Curve (if depositing stablecoins other than UST).
- Oracle failure
- Liquidity crisis
- Systemic risk in DeFi
- Pegged assets like stablecoins can de-peg
- First, I go to the Orion Money app here, connect my Ethereum wallet via MetaMask or WalletConnect, assuming I have one of the six listed stablecoins.
- In order to save gas, if I have multiple types of stablecoins, I might consider swapping them for a single kind of stablecoin ahead of time.
- If I have wrapped UST on Ethereum, I will notably save money on gas since it doesn’t require Orion to swap to UST via Curve before bridging to Terra.
- Btws, ignore the ORION token option at the bottom.
- Next, I choose whichever token to deposit, in my case UST, and click Deposit in green.
- I follow the prompts to Approve & Deposit, which will require 2 transactions on MetaMask.
- I’m done! Now, I can track my Interest earned under My Deposits. I could also return here to deposit other stablecoins.
About Author: DeFi Dad is a DeFi super-user, educator and investor. He and his team at 4RC (Fourth Revolution Capital) invest in teams building the next great protocol or application in DeFi, NFTs, and Web3. You can subscribe to his YouTube channel at defidad.com and follow him on Twitter.