DeFi Alpha: Using zkSync Era for a Potential Airdrop
- Featured Yields: Up to 72% APR on Stablecoins, 78% APR on ETH
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 opportunities in decentralized finance, as well as provide primers and guides about its emerging platforms. It is meant to be highly actionable and shareable.
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.
Latest Developments
Before we get started, here are the top headline-grabbing events from this week that every savvy DeFi investor ought to keep on their radar.
- Ether Surges To 11-Month High Despite $2B In Pending Withdrawals
- Ethereum Researcher Predicts Solo Stakers May Get Airdrops
- Sushi Plans To Reimburse Victims Of $3.4M Exploit
- Liquid Staking Platform Ether.Fi Deposits Surge Ahead Of Launch
- Voltz’s Growth Shows You May Need Speculators For Fixed Rates to Work in DeFi
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Yield Alpha
Each week we will provide options to earn yield on ETH, WBTC, stablecoins, and other major tokens.
- ETH: Up to 78% APR looping ETH 4X on Radiant Capital on Arbitrum
- This yield is accrued in ETH borrowing interest and mostly RDNT rewards.
- To participate, it requires a leveraged ETH/ETH position with 5% of the value of the looped position in the 80/20 RDNT/ETH Balancer LP.
- The RDNT LP must be staked for 12 months to achieve 81.6%.
- One must deposit ETH into Radiant here and loop 4X here + zap into an LP staked for 1-12 months (1 month = 4% net APR vs 12 months = 81.6% net APR).
- Caution: This is a leveraged ETH position that could get liquidated if borrowers do not maintain a health factor > 1. This is higher risk than lending or staking.
- WBTC: Up to 48% APR looping WBTC 4X on Radiant Capital on Arbitrum
- This yield is accrued in WBTC borrowing interest and mostly RDNT rewards.
- To participate, it requires a leveraged WBTC/WBTC position with 5% of the value of the looped position in the 80/20 RDNT/ETH Balancer LP.
- The RDNT LP must be staked for 12 months to achieve 51%.
- One must deposit WBTC into Radiant here and loop 4X here + zap into an LP staked for 1-12 months.
- Caution: This is a leveraged WBTC position that could get liquidated if borrowers do not maintain a health factor > 1. This is higher risk than lending or staking.
- MATIC: 13.4% APY with a MaticX/MATIC leveraged staking position in Cian
- The yield is backed by validator rewards using MaticX as collateral, and looping borrowed MATIC against the MaticX.
- To participate on Polygon, one can follow the prompts to deposit into the MATICX/MATIC Leveraged Staking strategy here on Cian.
- ATOM: 21.3% APR staking ATOM with Keplr Wallet on Cosmos Hub
- The yield earned is issued in ATOM.
- To participate, one must set up a Keplr Wallet, go to the Cosmos Hub validators on Keplr Dashboard, rank by APR, choose a validator, and click Delegate.
- Then, I specify how many ATOMs and follow the prompts to Delegate.
- BNB: 14% APY with the BNB/BNBx Ellipsis LP
- AVAX: 42% APY with sAVAX/AVAX leveraged staking position in Cian
- The yield is backed by validator rewards using sAVAX as collateral, and looping borrowed AVAX with Aave.
- To participate on Avalanche, one can follow the prompts to deposit into the sAVAX/AVAX Folding – Aave strategy here on Cian.
- SOL: 6.8% APY staking SOL with stSOL by Lido
- This is backed by SOL staking yield.
- To participate, one must deposit SOL here or buy it on a Solana DEX.
- FTM: 5.76% APR staking FTM via a Beefy Finance vault
- The yield is issued in FTM rewards.
- To participate, one must deposit FTM here on Beefy.
- Stablecoins: Up to 72% APR looping DAI 4X on Radiant Capital on Arbitrum
- This yield is accrued in DAI borrowing interest and mostly RDNT rewards.
- To participate, it requires a leveraged DAI/DAI position with 5% of the value of the looped position in the 80/20 RDNT/ETH Balancer LP.
- The RDNT LP must be staked for 12 months to achieve 78% APR.
- One must deposit DAI into Radiant here and loop 4X here + zap into an LP staked for 1-12 months.
- Caution: This is a leveraged DAI position that could get liquidated if borrowers do not maintain a health factor > 1. This is higher risk than lending or staking.
Please be aware we do not always report the highest yield rates because some high yields may be less sustainable due to high inflation token rewards or fewer LPs participating.
Starter Tutorial
Earn Up to 29% APR with a Maverick Intelligent Stablecoin LP
For anyone who has ever provided liquidity to an AMM, you know the pain of impermanent loss (IL). IL can be thought of as the loss incurred holding a balance of tokens in an LP versus having just held those same tokens without the LP.
Although Uniswap V3 was a major innovation in AMM capital efficiency, allowing LPs to place liquidity within specified price ranges, the added efficiency comes at a price–subjecting LPs to potentially more IL when deposited into tighter price bands.
A new AMM protocol Maverick Protocol claims to have a solution to maximize capital efficiency by also automating the concentration of liquidity as price moves. Maverick is self-described as the first Dynamic Distribution AMM capable of automating liquidity strategies.
TLDR: Maverick provides an AMM with built-in liquidity strategies to move the LP’s liquidity as the price of tokens change, in order to keep the liquidity actively in range earning fees, as well as reduce IL.
Maverick helps LPs to avoid high gas fees required to adjust positions themselves. Instead LPs can choose to follow the price of an asset in a single direction, effectively betting on where the price of a token might go.
Check out the example in the gif above showing a liquidity strategy ideal for a bull market, where LPs are betting on the price of a token moving up over time. This liquidity strategy uses a dynamic range order that follows the price in a pool if and when it moves to the right on the liquidity graph. This Mode Right strategy helps to avoid LPs having to continually move LPs back in range after a token rises above a price band during a bull run.
With Maverick, there are multiple liquidity modes to choose from:
Mode Right – single-sided deposit, for bull markets
Mode Both – two-token deposit, for ranging markets, higher risk of IL, less capital efficient
Mode Static – for ranging markets, similar to a Uniswap V2 or V3 LPs, likely less capital efficient
Mode Static allows LPs to add liquidity without using Maverick AMM’s liquidity shifting mechanisms. This means when an LP adds liquidity to a bin or range of bins, that liquidity stays in those bins regardless of price movement.
Similar to liquidity strategies on Trader Joe, Mode Static provides for 3 types of distributions:
Exponential: starts with a concentration of liquidity around the current pool price and spreads the rest of your liquidity in exponentially decreasing amounts across the bins to the left and right
Flat: distributes liquidity evenly across a range of bins, centered around current pool price, similar to a 50/50 Uniswap V2 LP
Single Bin: distributes your liquidity only in the active bin
A few other features to note on Maverick AMM:
- Maverick pools can only support 2 tokens.
- LPs supply liquidity and receive trading fees charged to traders.
- Currently, 100% of fees go to LPs.
- Liquidity is distributed using a series of bins that correspond to different price ranges.
- Of course, prices in a pool are a reflection of the ratio between the 2 tokens.
- Widths of bins vary pool to pool and are set by the LP who initially deploys the pool.
As of this writing, Maverick has impressively ranked in the top 5 AMMs by trade volume on Ethereum Mainnet for a little over a month since launching in March.
With ~$617M total trade volume and just under $18M TVL. The Volume/TVL is a metric that speaks to the capital efficiency of Maverick, which currently is higher than Uniswap or Curve, but I wouldn’t read too much into this given the short timeframe.
Before we get started, as a DeFi user and investor, I want to be clear I’m reporting on how this is proposed to work, not that Maverick is guaranteed to work. Reducing IL and solving for IL is very challenging. I look forward to seeing Maverick further stress-tested by LPs and traders.
Today, I’ll demonstrate how I can earn up to ~29% APR in the USDC-USDT with a Mode Both liquidity strategy.
Before we get started, please be aware of these risks.
- Smart contract risk in Maverick Protocol, which has not open-sourced its code yet, meaning its higher risk using it despite the audits
- Systemic risk in DeFi composability
- Stablecoins are capable of de-pegging
- Front-end spoof attack on the Maverick app
- Centralization risk–Maverick Protocol is not decentralized, with a startup still building it and I would assume plans to launch a token in the future
- Impermanent loss, but less given I’m using a stablecoin-only LP
Step 1: First, I go to the Pools tab, connect my Ethereum Mainnet wallet and scope out the potential LP yields. For this example, I’ll choose a stablecoin LP to mitigate any chance for IL, like the USDC-USDT pool. I end up here choosing the fee tier of 0.01% and bin width of 0.01%, currently holding about $4.33M TVL. And click Next!
Step 2: Because USDC-USDT is a pool with correlated stablecoins, there’s a potential to earn more fees in a concentrated range. I’ll choose the Mode Both which functions like a dynamic range order that follows the pool price right and left, keeping liquidity as active as possible.
Mode Right and Mode Left don’t make sense here given the USDC-USDT price is likely to revert to the mean, and I don’t want to have to babysit this LP going out of range like a Uniswap V3 LP.
Step 3: Lastly, I specify how much USDC or USDT to deposit, and it auto-fills how much of the other token I need. I follow the prompts to Approve and Deposit/Confirm those 2 tokens to create the dynamic LP which will follow the price of USDC-USDT using Maverick’s intelligent liquidity-shifting technology to keep my liquidity active.
Degen Tutorial
zkSync Era Airdrop Guide
zkSync Era, a Layer 2 scaling solution for Ethereum from Matter Labs, has attracted nearly $120M in TVL since launching its public mainnet three weeks ago.
Matter Labs managed to raise $200M in November during the depths of the bear market, so VCs certainly think that its technology holds promise.
Today, we’re going to use some applications that are live on Era to hopefully qualify for a potential $ZKS airdrop in the future.
Let’s get started.
Step 1: Add zkSync Era to Metamask
https://chainlist.org/?search=zksync&testnets=false
Step 2: Bridge Assets To Era
The official bridge currently only supports bridging from Ethereum mainnet.
However, you can use alternatives like Orbiter to bridge from other chains (Note that Orbiter also doesn’t have a token yet).
Step 3: Swap and add liquidity On SyncSwap
I’m going to swap some ETH for USDC and add liquidity.
Step 4: Mint a .zk domain
Purchase a domain and set your reverse record.
Step 5: Swap and add liquidity On Mute.Switch
Step 6: Buy and mint an NFT on Mintsquare
Step 7: Complete Crew3 (now Zealy) quests
https://zealy.io/c/zksync/questboard
Monitor the zkSync ecosystem page for new additions and try out the apps.
That’s it! As with all airdrop guides, it’s recommended that you repeat these tasks periodically in case projects look for ongoing activity, as in the cases of Arbitrum and Optimism.
Airdrop Alpha
In each DeFi Alpha guide, we update a list of DeFi protocols that have yet to announce and/or launch a token.
Gemesis NFT
NFT aggregator Gem has rebranded to OpenSea Pro after being acquired last year.
Past Gem users can claim a free ‘Gemesis’ NFT on OpenSea.
$ARB is Live!
Layer 2 network Arbitrum has launched its ARB token.
Claim your ARB tokens here.
We’ve been tracking Arbitrum ever since last summer’s Odyssey, in addition to tutorials on GMX, Radiant, TreasureDAO and more, so our readers should certainly be eligible!
- Arch Finance – a protocol for comprehensive indices that provide access to differentiated sources of market risk.
- Arbitrum – one of the leading L2s for Ethereum. Claimable now!
- Arrakis Finance – a trustless algorithmic market-maker, for auto-managing Uniswap V3 LPs on Ethereum, Polygon, Arbitrum, and Optimism
- Base – A new Ethereum L2, incubated by Coinbase and built on the open-source OP Stack, that could potentially have a governance token in the future
- DeFi Saver – a one-stop dashboard for creating, managing and tracking DeFi positions across Aave, Compound, Maker, Liquity, and Reflexer
- DeFrag – instant loans for Treasure gaming NFTs on Arbitrum
- Farcaster – a “sufficiently” decentralized social network where users will have the freedom to move their social identity between applications
- Jupiter – The leading DEX aggregator by trading volume on Solana
- LayerZero – An omnichain interoperability protocol, powering popular dApps like Stargate and Radiant Capital. Check out our airdrop guide here.
- Lens Protocol – A decentralized composable social graph, underpinning an emerging landscape of Web3 social media dApps including Lenster, Lenstube, and Orb
- LI.FI – A cross-chain bridge and DEX aggregator protocol
- Liquality – A cross-chain, non-custodial 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
- 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.
- Orb – one the leading mobile apps for Lens social media
- Phaver – one of the leading mobile app for Lens social media
- 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 derivatives protocol built on Synthetix on Optimism, with a newly launched perps trading platform called Polynomial Trade.
- 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
- 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
- Socket (formerly Movr) – their bridge aggregator Bungee moves assets between chains, finding the cheapest, fastest route
- StarkNet mainnet is live! Bridge and swap some tokens for a potential airdrop. Guide here.
- Volmex – Volmex is a tokenized volatility protocol, similar to the VIX but ETHV
- Wormhole – a cross-chain messaging protocol known for bridging between Solana, Terra, 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 – The same can be said about Zerion; if they ever release a token, they’re likely to reward those who interacted with their smart contracts swapping, lending, providing liquidity, or borrowing.
- ZigZag – a DEX on zkSync. The airdrop has been distributed. Check your zkSync wallet.
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.
