HODLer's Den, DeFi Edition ⚖️
HODLer's Den, DeFi Edition By Aromatic
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Disclaimer: Nothing in this report constitutes investment advice—I am just reporting on my accounts and its progress on each platform. You should not use this report to make financial decisions. I recommend you seek professional advice from someone who is authorized to provide investment advice.
Hey everyone and welcome to the HODLer’s Den, DeFi Edition!
Here you will find information on the DeFi (Decentralized Finance) crypto space. As usual, I will try my best to provide insight from a HODLer’s perspective.
Uniswap & Ampleforth (AMPL)
In the previous report, I started providing liquidity in the Uniswap ETH/AMPL pool so here is a brief update.
I bought into the liquidity pool when AMPL was priced around 2.60 USD. Currently, it is sitting at 0.73 USD. In theory, it should mean my portfolio is down 71% but since the pool is split between ETH and AMPL, my ETH/AMPL pool is down roughly 23%. A lot of people talk about impermanent loss, but the opposite also exists: impermanent gain. If I had held just AMPL, I would be down 71% on my investments, but having ETH helped reduce the losses. This serves as a constant reminder that liquidity pools in DeFi are extremely volatile and risky but the rewards are also one of the best in cryptos right now.
There is an incentive program for contributing to Uniswap’s ETH/AMPL pool—Geyser. You can stake your ETH/AMPL Uniswap token on Geyser to earn payouts in AMPL. The size and duration of your stake affects the rewards you receive. As you can see below, my Reward Multiplier is 1.6x because I have been staking for quite some time—it tops out at 3.0x after 60 days. I current have accrued 378 AMPL which I can withdraw at anytime as long as I pay the gas fee.
I know it is tough to stomach losses, especially when it comes to your hard-earned money, but what if liquidity pools were available back when Bitcoin (BTC) was trading under 100 USD—you would have regretted not investing. If you held out through the market cycles, you could probably retire today when BTC is at 11.7k USD or at the very least be very well off. This is not investment advice, but rather, to make an analogy to price fluctuation in cryptos and all markets.
YAM Yield Farming
If you are in the crypto DeFi space then you have probably heard about YAM or mentions about it. It is currently the hottest item in DeFi with ridiculous returns on investment (ROI). In less than a day I have earned roughly 18 YAMs which amounts to about 200 USD in value. It is currently an experimental monetary token so it is an extremely high risk play that comes with high rewards.
So what is YAM? From my understanding, which could be incorrect, YAM is a token that utilizes and combines a variety of popular protocols: rebasing from Ampleforth, governance from MakerDao, and yEarn’s yield farming strategy. I believe YAM is an acronym for yEarn (or YFI), Ampleforth, and MakerDao, but I could be wrong.
Rebase, coined by Ampleforth, is a unique way to adjust supply to demand without causing a huge impact to the market. Governance, used by MakerDao, allows all holders of a specific token to vote on changes made to a protocol in regards to that token. yEarn, a liquidity aggregator, is able to shift capital between DeFi lending protocols which ultimately provide lenders with one of the best returns. By combining all three features, YAM demonstrates just how versatile DeFi can be as projects can quickly be merged to provide an even better product.
Getting Started
Since YAM is experimental and will only last for 7 days, I wanted to get in early to reap the full benefits. I will document the process step by step and total up all the gas fees I paid.
I had Aave (LEND) available on an exchange so I sent it to my MetaMask. Once Aave was in my MetaMask, I went to https://yam.finance/ and selected the proper “farm”—in my case it is Aave Agriculture.
Next I had to Approve LEND which allows the protocol to interact with LEND inside my MetaMask wallet.
I confirmed the transaction on MetaMask and paid the associated fees—6.54 USD for me. Once the transaction completed, I am now able to add LEND into the protocol.
The next step allowed me to choose the amount of LEND I want stake. I went with the max amount.
Once again, I had to confirm the transaction which meant more gas fees: 16.34 USD.
And that was it, I successfully staked LEND and started earning YAM.
In less than a day, I have farmed almost 18 YAMs which is roughly 200 USD. Do not forget I spent a total of nearly 25 USD in gas fees to get started and probably the same amount if I decide to remove my assets. The current gas fees is extremely high and is a huge barrier to entry for anyone with small amounts of assets to participate. In addition, the YAM protocol is unaudited which puts it at high risk for bugs in its code.
Speaking of bugs, they discovered a bug with the rebase process and are now utilizing governance to decide the fate of YAM.
If there is not enough delegation to save YAM, this experimental token may end before the 7 day period. Again, this is a reminder that this token is very risky—I only put in what I could afford to lose without taking a big hit to my crypto portfolio.
I love that DeFi can quickly assemble multiple protocols and string them together to provide a new product. Even though YAM is a monetary experiment, I got to experience rebasing, participate in its governance process, and enjoy its liquidity aggregator, all in just one day. Currently, the main hindrance is the high gas fees, but I believe ETH 2.0 will remedy it. I am excited for the future of DeFi and I am glad to be learning about it at such an early stage.
YAM Update
The YAM journey ends shortly after just 3 days. Even though enough votes were delegated to save YAM, the governance code was also bugged, resulting in improper implementation of the new rebase code. YAM has also lost the ability of governance due to the bug and it is suggested that I harvest and withdraw my investment, which I did. The process took another 16 USD in gas fee—my total gas fee for this experimental token is now 40 USD. I did manage to harvest 59 YAMs, but I consider those to be valueless.
There is talk of YAM 2.0 in the works to be released in the near future. This time around, they will audit the code before release. It was extremely risky for them to release unaudited code, but it served as a great reminder that DeFi heavily relies on Smart Contracts which relies on codes. Hence, bugs are still a major risk for DeFi protocols—whether they are audited or unaudited.
Overall, I was glad to be part of the YAM experiment. I did not lose my initial LEND that I staked. I have 59 YAMs which I consider useless but I am hoping they can be used once the team releases YAM 2.0.
For more information on DeFi and crypto news in general, check out C1S’s channel on YouTube. There are plenty of videos for you to watch and learn about the fast-growing crypto space.