Decentralized economies have taken over cryptocurrencies, giving their owners a wide range of opportunities to generate high returns on their cryptocurrencies and to accumulate currencies. DeFi not only led to massive increases in governance rates and bonus tokens like YFI and LEND, but it also opened the way for new interest in cryptocurrencies.
The launch of liquidity protocols like Uniswap and Curve followed the explosion of DeFi, and even institutional clients began to show interest in generating revenue from their cryptocurrencies. Now, the subsequent explosion of crop products like Yearn.Finance and Pickle.Finance has allowed users to benefit from multi-generation protocols.
While some of the major DeFi tokens have recently undergone sharp price adjustments, activity in the sector itself is recovering after a sharp 40% drop on September 18th. Although the total value withheld decreased from $ 13.25 billion to $ 6.3 billion in just 4 days, it’s now down. Recovering about $ 9.5 billion is banned, according to DeFi Pulse data.
Harvesting is more difficult than it sounds
Yearn: Funding has become very popular among Ethereum whales, especially since the launch of yVaults, which allows users to deposit money.
These safes are, in fact, a set of automated procedures that go through several protocols to open positions in the most stable, profitable currency assets. Members also benefit from the increased number of tokens in the process, and the account works like a smart savings account, but is much smarter.
YVaults have been shown to deliver a high percentage of annual revenue (APY) to users, and some even reach four-digit percentages. However, APYs can be misleading, as they only show the expected return of a variable interest rate at a given time.
Most pruning processes only take a few weeks or even days, while the APYs shown reflect the percentages generated for the entire year.
This means that investors who are not interested in detail can be attracted to the large number of risky aquaculture complexes, but end up effectively losing money when they are ready to harvest.
How much money does a whale earn?
To delve into the misleading yield, Flipside Crypto built a calculator that measures percentage earned on yVaults Yearn.Finance. Thanks to this, the data analytics provider was able to determine the exact amount some of the biggest whales in the crypto sector could earn by betting on yVaults.
Using the yCRV vault, which Curve uses to generate interest from its holders, Flipside Crypto concluded that a whale in the yCRV vault blocked more than $ 97 million in yCRV tokens (a token backed by a basket of stable coins) and ended up earning a dollar. 800,000 in profits over three weeks. …
Another whale invested $ 40.6 million in the same vault and was able to earn $ 500,000 over the same time period.
Pisces III gradually invested more than $ 10.9 million and grossed about $ 177,000 over the same time period.
According to Flipside Crypto, while APY was not in the four-digit range, yCRV users received a modest yield of 2.17%, which equates to an APY of 40.46%.
While that’s an impressive number, there are many other pools that pay much higher interest rates, but it is also worth noting that investing in these vaults carries risks.
Is it worth the risk of liquidity pools?
YCRV storage is relatively safe, as it is not based on the price of yCRV, but rather on the price of the base DAI, USDC, USDT and TUSD stack coins, which can lose the stick.
However, other safes have higher prices as users may lose the investment altogether, as is the case with yETH safes, which use Ether (ETH) as collateral for metal DAI tokens. This means that if the price of Ether falls below a certain point, the user will lose the security and investment in storage.
In the future, as the DeFi sector expands, external factors such as regulatory barriers and a lack of network scalability may become a challenge to investors and protocols.
For these reasons, investors are advised to never invest more than they can lose, regardless of the depth of the pool of liquidity or size.