⍺ DeFi Alpha: Become a Curve LP for sETH/ETH and Boost Returns with Convex

DeFi Alpha is a weekly newsletter published for our premium subscribers every Friday, contributed by Defiant Advisor and DeFi investor at 4RC, DeFi Dad, and our Degen in Chief yyctrader. It aims to educate traders, investors, and newcomers about investment...

Motivation

Two years ago, DeFi investors could easily name every yield farming opportunity without much effort. It was a simpler time, when only a handful of teams had launched with any liquidity to trade, lend, borrow, provide liquidity, or even demonstrate new primitives such as no-loss savings by PoolTogether.

But times have changed! Before the current bear market took hold, DeFi liquidity had grown to hundreds of billions of dollars across Ethereum with new burgeoning DeFi economies taking shape on EVM-compatible chains such as Polygon and Avalanche and non-EVM chains such as Cosmos and Solana. Any given day, a new DeFi or NFT project is launched.

So, after writing and creating countless DeFi guides and tutorials since 2019, we at The Defiant agreed it’s time we publish a more detailed weekly guide on all you need to know to keep up with new and old yield earning opportunities.

This is DeFi Alpha by The Defiant.

Any information covered in DeFi Alpha should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions. Any mention of a token or protocol should not be considered a recommendation or endorsement.

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📈 Yield Alpha

Each week we will provide options to earn yield on ETH, WBTC, stablecoins, and other major tokens.

ETH - Earn 20.72% projected vAPR with the Curve sETH LP staked in Convex
- This yield is accrued in CRV, CVX, and trading fees.
- To participate, one must first deposit ETH or sETH into this Curve sETH LP and then stake the LP here in Convex.
- Check out the Beginner Tutorial today to learn more!
BTC - Earn 8.97% projected vAPR with the Curve HBTC LP staked in Convex
- This yield is accrued in CRV, CVX, and trading fees.
- To participate, one must first deposit HBTC and/or WBTC into this Curve factory pool and then stake the LP here in Convex.
AVAX - Lend AVAX to the sAVAX/AVAX pool on Platypus via Vector at 18.6% APR
- This yield is issued in VTX, PTP, QI, and AVAX.
- To participate, one must deposit into the AVAX Stake option here on Vector.
SOL - Lend SOL to leveraged farmers on Tulip Protocol at 5.63% APY
- This yield is backed by interest paid by borrowers on Tulip.
- To participate, one must deposit SOL in the Tulip lending tab.
MATIC - stake MATIC with MaticX and LP MaticX-MATIC on Balancer for a net 37% APY
- The yield is backed by validator rewards using the MaticX liquid staking derivative + trading fees on Balancer + BAL rewards + SD rewards.
- To participate on Polygon, I use the Stader MaticX dApp to mint MaticX.
- Then, I deposit into the 50/50 MaticX-MATIC pool on Balancer and stake the LP.
ATOM - mint pATOM and stake the pATOMs on Ethereum to earn more pATOMs on pSTAKE at a rate of 13.5% APR
- The yield earned is issued and claimable in pATOM.
- To participate, one must first mint a 1:1 representation of ATOM as pATOM on Ethereum by using the pSTAKE dApp under Stake
- Then, deposit/stake pATOMs to get stkATOMs and earn 13.5% APR
FTM - stake with sFTMx by Stader, earning 13% APY
- The yield is issued in FTM rewards, as sFTMX is earning FTM via validator rewards to support Fantom’s PoS network.
- To participate, one must deposit FTM to receive sFTMX here on Stader.
HBAR - stake with the first HBAR liquid staking derivative by Stader, earning 41.7% APY
- The yield is issued in HBAR rewards, as HBARX is earning validator rewards.
- To participate, deposit HBAR to receive HBARX here on Stader.
- Caution: This is in beta and withdrawals will not be possible until July 2022 or later.
Stablecoins - LP with DOLA, USDC, USDT, and/or DAI at 37.1% projected vAPR in the Curve DOLA+3Crv LP staked in Convex.
- This yield is accrued in CRV, CVX, and trading fees.
- To participate, one must first deposit into this Curve DOLA-3Crv LP and then stake the LP here in Convex.

🪂 Airdrop Alpha

In each DeFi Alpha guide, we update a list of the most obvious DeFi protocols that have yet to announce and/or launch a token.

Arch Finance - a protocol for comprehensive indices that provide access to differentiated sources of market risk.
Arbitrum - one of the leading L2 solutions for Ethereum with live dApps such as Uniswap, SushiSwap, Hop, and more. A token may be imminent, according to this tweet.
Concentrator - an app for boosting Curve LP yields by harvesting and auto-compounding rewards earned via Convex
DeFi Saver - a one-stop dashboard for creating, managing and tracking DeFi positions across Aave, Compound, Maker, Liquity, and Reflexer
Euler Finance - a non-custodial protocol on Ethereum that allows users to lend and borrow almost any crypto asset, just launched but has yet to launch a token.
Francium - leveraged yield farming similar to Alpha Homora but on Solana, one can choose to simply lend single assets or hold leveraged LPs to potentially earn an airdrop here
Hop Protocol - Congrats if you earned the HOP airdrop announced this week! Claim here.
Katana DEX - Farm/stake the AXS/WETH LP or SLP/WETH LP on this forked AMM on Ronin to earn WRON (wrapped RON), so this is a guaranteed reward but for a token not yet trading
Jupiter - The leading DEX aggregator by trading volume on Solana
LI.FI - A cross-chain bridge and DEX aggregator protocol
Liquality - A cross-chain, noncustodial browser extension wallet, similar to MetaMask but with more integrations for swapping cross-chain
Magic Eden - The leading NFT marketplace by trading volume on Solana
Nested - a crypto social trading platform built on Ethereum and other chains
Optimism - Congrats if you followed our guide previously about a hunch Optimism would release a token! Claim OP Airdrop #1 here and look for 3 more retroactive airdrops in the future. Learn more here.
Opyn - one of the OG decentralized options protocols on Ethereum, with major investors that signal a token has to be in their future. Buy/sell puts or call options to earn a possible future airdrop.
Polymarket - one of the strongest players in the DeFi prediction market vertical, bet on an outcome related to crypto, politics, sports and more or add liquidity
Polynomial - A newer DeFi derivatives vault creator, built on Optimism
Set Protocol - one of the earliest DeFi protocols yet to launch a token for DeFi asset management, popular for TokenSets and known for powering IndexCoop indexes
Sense Protocol - A decentralized fixed-income protocol on Ethereum, allowing users to manage risk through fixed rates and future yield trading on existing yield bearing-assets
Socket (formerly Movr) - their bridge aggregator Bungee moves assets between chains, finding the cheapest, fastest route
Volmex - Volmex is a tokenized volatility protocol, similar to the VIX but ETHV
Wormhole - a cross-chain messaging protocol known for bridging between Ethereum, Solana, Polygon, BSC, Avalanche, Fantom, and Oasis
Yield Protocol - A newer protocol for fixed-term, fixed-rate lending in DeFi, backed by Paradigm, one might earn a future airdrop by lending DAI or USDC
Zapper - participate in Zapper trading, lending, providing liquidity, or yield farming; given the Zapper Quests and NFT Rewards program, it can be surmised that if Zapper ever releases a token, this is one way they might do a retro airdrop
Zerion - A favorite all-in-one DeFi dashboard and now non-custodial wallet, they recently released Zerion DNA where you can claim a self-evolving avatar NFT if you import wallets or create new wallets in Zerion mobile wallet; a possible signal the team will reward users who use their new wallet for signing transactions

👨‍🎓 Defiant Starter Tutorial

When we think about DeFi, one of the earliest and most well known protocols is Synthetix. Synthetix has been a trailblazer for enabling the creation of synthetic assets, allowing DeFi users to trade just about anything on-chain, including novel derivatives and real-world assets such as commodities and forex. There are a few key components to making Synthetix work.

In Synthetix, synths are derivative tokens providing exposure to a range of assets. Synths can be traded with “infinite liquidity and zero slippage” thanks to the protocol’s pooled collateral model, but one might debate thinking about such liquidity as being limited by the amount of underlying collateral backing these synths. The price of synths is dictated by integrated Chainlink oracles.

By staking SNX, stakers mint synths, which are overcollateralized and backed by the value of SNX. When one stakes SNX and mints sUSD, they create a debt, in the form of how much sUSD they need to burn to unlock their SNX again. This debt represents a proportion of all the debt in the system. Whenever someone makes a gain through synths, they make it against all the debt in the system. Hence, stakers are similar to market-makers, taking the opposite side of a synth trade, and so over time, these stakers can accrue more or less network debt.

What’s key about all this is that trades between synths generate a small fee that is distributed to SNX collateral providers. Recently, Synthetix introduced an atomic swap function with the SIP-120 proposal. This proposal means that users can route larger trades between different asset classes (ie ETH to BTC) with minimal slippage. Along with this update, there was a crucial integration with Curve Finance and the DEX aggregator 1inch, enabling larger swaps on 1inch to be routed in a single transaction through Synthetix zero-slippage trades, for comparably lower fees and less slippage than you’d find elsewhere in the DEX landscape.

In recent weeks, this has caused Synthetix fees earned by SNX stakers to skyrocket, putting Synthetix ahead of even the Bitcoin network’s daily fees! To read more about this, check out our post in The Defiant.

Source: cryptofees.info

In light of these sustained growing fees earned via “zero-slippage” synth trading on Synthetix, one can earn trading fees from the increased trade volume in the Curve sETH/ETH pool, while remaining 100% exposed to the spot price of ETH, without also taking on the risk of accruing network debt as an SNX staker. I’ll demonstrate how I can become a Curve LP for sETH/ETH and then boost returns by staking the LP in Convex to 20% vAPR, as of this writing.

Before we get started, please be aware of these risks.

Smart contract risk in Synthetix and Curve
A failure of economic incentive design in the backing of synths (death spiral of SNX)
Systemic risk in DeFi composability
Pegged assets such as stablecoins or sETH can potentially depeg
Yield can go up or down depending on the amount of competing liquidity and the trading volume in each pool

Step 1: First, I go to the Curve sETH/ETH pool and connect my Ethereum wallet.

Step 2: Next, I specify how much ETH and/or sETH to deposit under Deposit. Curve will rebalance whatever ratio of tokens I deposit, but I check the estimated Slippage to be safer. I click the left green button labelled Deposit so I can later stake the LP in Convex, not directly in the Curve gauge. This requires just 1 transaction in MetaMask.

Step 3: Lastly, I go to the Stake tab on Convex Finance, search sETH, specify depositing the Max amount of LP tokens and follow the prompts to Approve + Deposit & Stake, requiring 2 MetaMask transactions. And I’m done!

The information contained in this newsletter is not intended as, and shall not be understood or construed as, financial advice. The authors are not financial advisors and the information contained here is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation. We have done our best to ensure that the information provided is accurate but neither The Defiant nor any of its contributors shall be held liable or responsible for any errors or omissions or for any damage readers may suffer as a result of failing to seek financial advice from a professional.