Beefy Finance is among the group of yield optimizers in DeFi. Beefy Finance is on the Fantom chain. They find ways to pump up the returns with no or only small increases in risk. And today they have a spotlight on an amazing opportunity. You can earn 26% with virtually no risk of impermanent loss.
How? Let’s take a look.
What is Impermanent Loss?
Impermanent Loss is the loss of your principal when you yield farm. In your farm, you’ve put in $100 of Coin X and $100 of Coin Y. When you cash out, you cash out in equal dollar amounts too. But if Coin X went up in value to $120 while Coin Y stays the same, then you miss out on that $20 profit.
Why?
Because you have to cash out in equal dollar amounts like the way you cashed in. The loss is in comparison to if you just held Coin X outside of the farm.
And if you want to know one reason why many farms offer 150% or 400%, it’s because the risk of IL is high.
The 4Pool Opportunity
If you are into DeFi, then you’ve probably heard a lot about the Curve Wars. Terra is going after DAI not to just solidify UST in the #3 position as a stablecoin but to be the #1 choice for DeFi apps. It’s based on the idea that most of us agree with. decentralized finance should have decentralized stablecoins. And while it will take a while to catch USDT and USDC, more apps outside the Terra system are starting to use UST.
Curve has a 3 Pool of DAI, USDT, and USDC. DAI was on the road to decentralization but now has a heavy backing of USDC as collateral.
Can Terra LUNA Kill DAI?
Well, they want to and believe that universal adoption of UST will kill DAI. And one way to do both of these things is their 4 Pool. The 4 Pool is USDC, USDT, UST and FRAX. UST is an algorithmic stablecoin and so is Frax. The difference aside from 2 networks is that Frax is a fractional algorithmic coin. That means it partly backed by collateral and partly backed by algorithm.
The 4 Pool Crushes the 3 Pool
The 3Pool is paying 0.77% but does allow for the easy swapping of stablecoins, which was its original purpose. The 4Pool, here on Beefy Finance, is paying 26%. The Orkan Protocol on FTM is boosting this pool and the payment is in ORKAN token.
So your returns could vary wildly based on the price of ORKAN when you earn and sell your rewards.
But that shouldn’t matter too much if you are diligent about collecting your rewards and selling right away. And with 4 stablecoins in the pool, your chances of impermanent loss are practically zero. At least one of the 4 stables would have to lose its peg to the USD for IL to happen. That can happen. But it’s unlikely and risks are super low.
Stables Price Activity
The 4 stablecoins currently trade at 0.9999, 0.9967, $1, and 0.9996 on CoinGecko, just as they should.
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