DeFi Alpha: Provide Liquidity On Connext To Earn Yield And A Potential NEXT Airdrop
Using Connext On Arbitrum Could Qualify For A Future Airdrop From The Layer 2 Network
- Featured Yields: Up to 36% APY on Stablecoins, 5-33% APY on ETH and BTC
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.
- OP Hits Fresh Highs After Foundation Unveils ‘Bedrock’ Upgrade
- NFTfi Processes Record Number Of Loans In January
- Ethereum Developers To Launch Testnet Supporting Staked ETH Withdrawals(meaning Shanghai Upgrade + ETH withdrawals due in March!)
- Gains Network Rides Arbitrum Launch To All-Time Highs
DeFi Alpha Call
The DeFi Alpha call is held every Monday at 2pm ET in Discord.
If you missed it, check out the recording of this week’s call.
Yield Alpha
Each week we will provide options to earn yield on ETH, WBTC, stablecoins, and other major tokens.
- ETH: 33% APY with pETH/ETH Curve LP staked in Convex via Concentrator
- This yield is accrued in aCRV + trading fees compounded in the LP.
- To participate, one must Deposit into the pETH/ETH Curve LP here (not stake).
- Then, one must stake the Curve LP under the ETH-pETH vault under aCRV Vaults on Concentrator.
- BTC: 5.47% projected vAPR with the Curve multiBTC+sbtc2Crv LP staked in Convex
- This yield is accrued in CRV, CVX, and trading fees.
- To participate, one must first deposit into this Curve factory pool and then stake the LP here in Convex.
- MATIC: 14.4% APY with 50/50 MaticX-WMATIC LP on MeshSwap
- The yield is backed by validator rewards using the MaticX LSD (5.76% APY) + MeshSwap trading fees + MESH rewards + SD rewards.
- To participate on Polygon, one may use the Stader MaticX dApp to mint MaticX.
- Then, deposit into the MaticX-WMATIC pool on MeshSwap and stake the LP.
- ATOM: 21% 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: 13% APY with 50/50 BNB/BNBx ApeSwap LP in a Beefy Finance vault
- AVAX: 7.05% APY staking AVAX with ankrAVAX by Ankr
- This yield is issued in AVAX.
- To participate, one must deposit AVAX for ankrAVAX here on Ankr.
- SOL: 10% APR as an LP for stSOL/SOL in Orca
- This is backed by Solana staking yield, LDO rewards, and ORCA rewards.
- To participate, one must deposit stSOL/SOL into a concentrated LP here.
- FTM: 4.7% APY staking sFTMx liquid staking derivative by Stader
- 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 for sFTMX here on Stader.
- Stablecoins: 36% APR with the jEUR/sEUR LP staked in Velodrome on Optimism
- This yield is accrued in VELO.
- To participate, one must deposit and stake in this jEUR + sEUR LP.
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.
Tutorial
Provide USDC or ETH Liquidity On Connext To Earn Yield and a Potential NEXT Airdrop
Founded in 2018, Connext is a modular interoperability protocol that lets you build secure crosschain apps (called xApps) by passing funds and data between chains.
By 2023, bridging is a commonly understood use case in DeFi but going back to the last bear market between 2018-2020, the founder Arjun Bhuptani looked like a rebel without a cause. He was ahead of the market, working on the bleeding edge of enabling a cross-chain future when most crypto users were stuck on centralized exchanges.
Because blockchains do not scale to the level of volume needed for mainstream adoption, Ethereum and other programmable blockchains solve this problem by moving users, funds, and data to multiple parallel domains such as sidechains (ie Polygon) and rollups (ie Optimism, Arbitrum, zkSync). The drawback to this design choice is a fragmented user experience.
Connext is working to enable Web3 application users to be able to move between chains without having to fully understand how it works and how to navigate between chains/L2s. Connext refers to this multichain experience as xApps.
xApps promise to retain the security and trust-minimization properties of the underlying chains, which as most of us know, has not been the experience up until now with rampant bridge-related DeFi exploits.
Below are a few examples of the kinds of DeFi applications you can expect in the form of xApps powered by Connext:
- Lending on one L1/L2 and borrowing on another
- Depositing into an LP on one L1/L2 and earning yield on another
- Enjoying Uniswap V3 TWAPs on every L1/L2 without having to stand up oracles on each
- Chain-agnostic NFT marketplaces where you can buy NFTs unknowingly from any chain
- Voting on Snapshot across any chain for a DAO on another
On January 31, 2023, the team announced a final milestone before the full Connext Amarok launch, kicking off the bootstrapping of liquidity. This new network introduces two types of liquidity, active and passive, as well as nextTokens, an internal unit of account that represents a router’s ownership of locked funds on Ethereum L1, similar to other liquidity networks like Hop and Across.
According to the team at Connext:
Passive LPing ensures there is available liquidity for a given adopted asset on each chain by incentivizing liquidity provision and rebalancing by the market. In other words, passive LP affects the price of transactions.
Active LPing within Connext allows routers to effectively loan funds to a waiting user and be repaid by the protocol. In other words, active LP affects the latency of transactions.
Together, the combination of these approaches ensures that users & applications can transfer adopted assets and data from an origin chain and receive adopted assets and data on the destination chain nearly instantly and with minimal added security/trust assumptions.
Today, I’ll show how I can provide passive liquidity to Connext Amarok and not only earn fees but also a likely future airdrop of NEXT tokens.
Anyone can lend USDC or WETH to help bootstrap liquidity, but I’ll focus on the Arbitrum USDC pool, to also possibly earn future Arbitrum tokens.
Also, special Galxe NFTs will be available to be claimed by the top 30% wallets on every chain that provide liquidity over the course of 3 months.
Before we get started, please be aware of these risks.
- Smart contract risk in Connext
- Front-end spoof attack on the Connext app
- Admin key compromise
- Systemic risk in DeFi composability
- A pegged stablecoin like USDC could de-peg
Step 1: First, I connect my Arbitrum wallet here on the Pools page for the Connext app.
Step 2: I end up here on the USDC Arbitrum Pool page but notice that if I simply enter USDC, I’ll incur more negative slippage.
Step 3: So I need nextUSDC instead, and I follow the blue button prompt to get nextUSDC and end up on this Bridge page. I’ll bridge 1000 USDC to get 999.5 nextUSDC on Arbitrum.
Step 4: Lastly, I end up with 999.5 nextUSDC on Arbitrum and return to the USDC Arbitrum Pool page, switch my network back to Arbitrum, and deposit all my nextUSDC (2 transactions). I’m all set and can sit back now and enjoy 1.75% APR, but more importantly, look forward to a potential NEXT + Arbitrum future airdrop.
Airdrop Alpha
In each DeFi Alpha guide, we update a list of DeFi protocols that have yet to announce and/or launch a token.
Blur Airdrop 3
Blur has announced that its third airdrop round will be geared towards users to place bids on the marketplace. You can find our step-by-step tutorial from last month here. The BLUR token is now expected to launch on Feb. 14.
Optimism Airdrop
Congratulations if you followed our guide betting on a hunch that Optimism would release a token!
In a previous DeFi Alpha, we covered a series of on-chain quests that could make you eligible for the next round of $OP airdrops.
$OP is Live! Claim guide here.
- Arch Finance – a protocol for comprehensive indices that provide access to differentiated sources of market risk.
- Aztec – an open source L2 bringing scalability and privacy to Ethereum, with zkSNARK proofs, having launched a private DeFi yield aggregator zk.money.
- DeFi Saver – a one-stop dashboard for creating, managing and tracking DeFi positions across Aave, Compound, Maker, Liquity, and Reflexer
- 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
- Jupiter – The leading DEX aggregator by trading volume on Solana
- 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.
- 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
- 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.
- SudoSwap has released details about its SUDO token and airdrop.If you followed our guide from August 12 and created some trading pools, you should be eligible!
- 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 – same can be said speculated 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.
- zkSync is a Layer 2 scaling solution for Ethereum that uses zero-knowledge proofs to enable scalable low-cost payments. Bridge some assets and do some swaps for a potential airdrop. Guide here.
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.
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