This is a weekly tutorial on the most compelling opportunities to consider yield farming, written by our friend DeFi Dad, an advisor to the Defiant and member of the core team at Zapper. The goal is to expose more Defiant readers to new DeFi applications and their associated liquidity mining programs.
Background on Protocol: For all the innovations in DeFi the last few years, few have garnered more love and adoration than vaults by Yearn Finance. Yearn created vaults like yUSD to offer exposure to automated strategies for stacking yield, often in the form of interest, trading fees, and pooled rewards sold for profits.
Two projects that drew inspiration from Yearn are DeFiDollar and Badger Finance. DeFiDollar is a multi-chain DeFi protocol building a range of products for including indexes, yield diversification, and how to enable capital efficient loans. DeFiDollar previously created a stablecoin index called DUSD to mitigate the risk of volatility and systemic failure in stablecoin holdings, which is very similar in its utility to yUSD.
Badger Finance is a DAO self-described as “dedicated to building products and infrastructure to bring Bitcoin to DeFi.” Similar to vaults by Yearn, Badger Finance has introduced a lineup of products called Sett Vaults for automating strategies to provide liquidity, earn yield, and ultimately accrue more tokenized BTC on Ethereum.
What happens when you combine DeFiDollar’s mission to build yield diversifying products for pegged assets with Badger’s focus on automated strategies for growing tokenized BTC liquidity in DeFi? You get tokenized interest bearing BTC — ibBTC!
The interest accrual for ibBTC comes from underlying Badger Setts and Curve pool yields so that those holding ibBTC are passively earning 3 yields at once:
- Curve trading fees
- Farmed CRV
- Farmed BADGER
The trading fees from Curve along with the farmed BADGER and CRV are swapped back into the underlying tokenized BTC.
The TLDR is: you can ibBTC as an asset pegged to the price of BTC but with the added bonus of passively earning yield denominated in tokenized BTC, while doing no extra work and paying no added gas fees.
As of writing this morning, the ibBTC/WBTC liquidity pool in SushiSwap has the 9th deepest liquidity at $55.4M.
Opportunity: For those seeking to earn passive income while exposed to ibBTC and providing liquidity, the ibBTC-WBTC LP in SushiSwap can be deposited into a Badger Sett Vault to compound your yield from ibBTC earning an aggregate yield of 19.06-43.29% yearly ROI thanks to:
- SushiSwap LP fees
- xSUSHI rewards airdropped every month (moving to every 2 hours in a few weeks)
- Claimable BADGER + DFD rewards on the Badger Portfolio View
The quoted range of ROI is designed to allow you to increase your rewards from 1 to 3x by competing for a higher boost–a clever way to gamify earning yield in Badger. Essentially, the more liquidity you provide, the more of a “boost” you receive earning higher yield in that range of 19.06-43.29%. However, the base yield at this time is 19.06% yearly ROI.
Source: Created by Gabriel Haines for the Badger DAO in the Badger Wiki
Time to Complete: 5-10 mins if paying the recommended FAST gas price on gasnow.org
Gas + Protocol Fees: Based on the FAST gas price on gasnow.org currently between 15-30 Gwei with ETH at $2600, I would estimate paying the following gas fees.
- Depositing into ibBTC / WBTC SushiSwap LP = $30-$40
- Staking the SLP in Badger Finance Sett Vault = $10-$20
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 DeFiDollar, Badger Finance, and SushiSwap.
- Oracle failure
- Liquidity crisis
- Systemic risk in DeFi composability and holding pegged assets
- Estimated projections of ROI can change based on weekly performance of vault strategies, changes in liquidity, and the fluctuating prices of reward tokens like BADGER.
- Most of the risks above can be mitigated by buying Protocol Cover from Nexus Mutual to protect the value of assets deposited into Badger Finance.
- First thing I do is go to Zapper Pools to add liquidity to the ibBTC/WBTC SushiSwap LP. I can add liquidity with any token but if I add with WBTC or ibBTC, I will save gas fees.
- BONUS: At Zapper, we just launched Quests and NFT Rewards as you claim XP for doing things like checking your dashboard or adding liquidity. You earn 750 XP for adding liquidity! After you add liquidity, look under Quests on the far left to Claim your XP with just a signature (no gas) for adding liquidity, and later use this XP to claim NFT rewards.
- Next, go to the Badger app and click under Sett Vaults to find the Wrapped BTC / ibBTC vault.
- Then click on the top option above to deposit the SLP token for the WBTC/ibBTC pool. It will require 2 transactions to Approve and then Deposit the SLP.
- Lastly, you can check out the Portfolio View by flipping a switch on the Sett Vaults tab on Badger to track the performance of your staked SLP. xSUSHI rewards will be airdropped to your wallet. To claim your accrued BADGER and DFD rewards, click on the Claim Rewards button in the top right in orange.
About Author: DeFi Dad is a DeFi super-user, educator, and investor. You can subscribe to his YouTube channel at defidad.com, catch new episodes of Zapper TV every Friday, and get started on your DeFi journey with Zapper Learn.