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Best yield farming optimizer to use for the most gains (YFO)

Best yield farming optimizer to use for the most gains (YFO)

In 2020, no ‘pure’ crypto enthusiast can insist that they have successfully ignored the lush idea of yield farming totally. Since Compound made its mark in the decentralized finance (DeFi) hustle with the COMP governance token, crypto users have swarmed towards developing new and ingenious strategies to generate the most yield from their token investments. This move effectively shows how long it’s been since the Initial Coin Offering boom was all that mattered in the crypto space. 

One of those bright ideas put forward was by Andre Cronje, whose design philosophy mapped the creation of the now-famous YFI. To put YFI’s achievement in a sentence, YFI amassed its fanbase when it achieved 2000% APR, and it managed to hold a 100+% APR return rate for quite a while before newer models and strategies grabbed their own share of the limelight.

Using the idea as a base model, many experts are in their workshops redesigning what is now popularly known as a yield farming optimizer (YFO). The YFO is essentially a yield farming protocol created to maximize profit by shifting invested digital assets around in target circles to provide a level of liquidity that provides the highest paying yield opportunities. 

A perfect example of such a successful redesign is JFI by the Justpool finance team. The team deployed JFI as the yield farming optimizer on the Tron platform with numerous pools on JustSwap, to begin with. The change led to an increase in net profit and reduced gas fees for participation in the liquidity provision on the JustSwap platform.

We can see the purpose of a yield farming optimizer in two points:

  • First, there’s a baiting fee termed ‘trading fees’ that the platform can now employ to draw in liquidity providers. This incentive favors both the system leaders and liquidity providers.
  • JFI staking can then become executable on as many as 21,000 tokens to achieve an exponential return on profit as liquidity factors in. Of course, this comes along with voting and governance rights to widen the scope of Defi yield farming on the JustPool finance platform.

In their system, the community oversees governing the $JFI, and the rules are set so that token earnings can only be through mining as there are no plans for ICOs, and pre-mines are also out of the equation. Other system governors might want to keep a hold on some of their tokens, but claiming to open the total number of tokens to the community has proven to be the fastest way to draw liquidity catalysts in. 

The $JFI yield farming pools have also been set to be mined in as little as 10 weeks. The strategy is to mine three pools that contain an equal number of tokens (7000 each) weekly, with half to be mined in the first week, before an estimation on the half of that number is mined in the following week. The progression continues with half of the present week mined in the next until the ten weeks are over. Subsequently, the team will share the liquidity stakes as a reward to all miners in each pool.

The execution of a yield farming optimizer such as this provides interesting insight towards the future of DeFi. After all, an increase in the probability of earning profit is always welcome, and where the profit yield grows, is where you’ll see liquidity investors.

Best Yield Farming Optimizer (YFO)

An exciting new Yield Farming Optimizer coming soon is the one from DefiYield.Info. Be sure to check them out for new updates and features regarding defi and yield farming opportunities.

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Disclaimer: Statements on this page do not represent the views or policies of anyone other than the person who says or writes them. The information presented to you on this site is made available for discussion purposes only, and is not cryptocurrency investing or any other type of investing recommendations or advice. Under no circumstances does the information on this page or site represent a recommendation to buy or sell cryptocurrencies and crypto securities. All product and company names are trademarks™ or registered® trademarks of their respective holders. The use of them does not imply any affiliation with or endorsement by them. By using this site you agree to our website terms and privacy policy found at watchcrypto.media/terms-privacy

Understanding Impermanent Loss

Understanding Impermanent Loss

Imagine our shock when we discovered that processing liquidity doesn't mean a guaranteed future as we watched millions of staked tokens lose value before our very eyes. It seemed better with the old technique where we just held our tokens. But understanding the unfazed advent of the automated market maker (AMM) technology plays a significant role in helping to overcome 'impermanent loss' (the term used to define the risk that DeFi's many liquidity providers run every time they try out a basic buy-and-hold strategy).

In order to get the way to circumvent this risk, we must first know the enemy. So, what is Impermanent loss?

What is Impermanent Loss?

Impermanent loss is the degree of deviation between the token value in an AMM and the value of a token kept in a wallet. The rather optimistic 'impermanent' part of its name is simply to acknowledge the rare possibility that the relative token prices in an AMM will go back to their initial state (the value when you placed the token will then replace the loss and you even get 100% of the trading fees in addition). 

The sky is not that blue, however, and that's why liquidity providers often lose their capitals in that process, in addition to negative returns on the investment.

What Causes Impermanent Loss?

The roots of Impermanent loss are the arbitrageurs. It is common knowledge that AMMs are not bound by fluctuating market rates. However, changes in token prices still reflect in the disconnected AMMs. So, how does that happen? 

It turns out that arbitrageurs manually adjust AMM prices by purchasing underperforming assets or selling the overpriced ones until the AMM prices reflect the external market prices. Not seeing how that relates to impermanent loss? Well, that's because arbitrageurs customarily choose to make their profits from the invested assets of liquidity providers. That shortage is called impermanent loss. 

How to Mitigate Impermanent Loss

To avoid impermanent loss, the more advanced traders have taken to keeping hawk eyes on any flux in AMM prices, with their intentions clearly geared towards avoiding losses. Of course, there are less hectic ways to inhibit impermanent loss. One is to regulate the price divergence.

If the token price difference between pieces in the AMM and the external market is the driver for impermanent loss, then minimizing that widening gap is crucial to relaxing the risk of impermanent loss. 

As long as AMM tokens don't run out of commission and the relative prices of both external market tokens and AMM tokens remain consistent with each other, there's no need for arbitrageurs in the equation. Liquidity providers can then start thinking about earning money from their trading fees. To prove that theory, tokens that retain a consistent price range (with respect to the external market mirror assets) always turn out to be an effective repellent for impermanent loss. Of course, these systems need to be appropriately optimized for the profit of the liquidity providers. 

This means that providers must always withhold an amount designated to be a 'backup asset' when they're thinking of investing liquidity in synthetic tokens and stablecoins. Many developers have created Chainlink price oracle integrations to peg reserves for liquidity providers and maintain the AMM token price in stasis. They only change with respect to the external market prices flux based on the readings of the oracles, which means bye to the arbitrageurs. 

By using such a design, liquidity providers can fearlessly invest in volatile tokens again without fear of impermanent loss, just as much as they would with stable tokens. And this rules out the defensive move of holding synthetic assets when one would otherwise stake, which can even be a 100% liquidity provision for token exposure in AMM. 

Bottom Line

As long as the problem of impermanent loss is mitigated, liquidity provision in AMMs can relaunch towards its true potential. On that foundation and through investors with the latent capital to actually make it a passive market, the newly improved and risk-minimized AMMs can now truly become the biggest answer to catalyzing the growth of decentralized liquidity. 

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Mainframe MFT | Interview Mick Hagen | Boxmining

Mainframe MFT | Interview Mick Hagen | Boxmining

Mainframe, a decentralized communication network. The vision for Mainframe is for the network to be resistant to censorship, surveillance, and disruption by outside influence. This interview features Mainframe founder and CEO, Mick Hagen as he talks about his project, the issues Mainframe can solve, potential use cases, and future partnerships.

0:04 What is Mainframe

2:20 Apps that can be built on Mainframe

3:10 Solving issues like back-doors to secure messaging

7:33 Firewalls and potential blocks to secure communication

9:55 Will Mainframe be censored by Governments

10:10 Mainframe Token usage

15:20 Risks of Malicious Node

16:24 Partnerships

This video was created by Boxmining.

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Disclaimer: Statements on this page do not represent the views or policies of anyone other than the person who says or writes them. The information presented to you on this site is made available for discussion purposes only, and is not cryptocurrency investing or any other type of investing recommendations or advice. Under no circumstances does the information on this page or site represent a recommendation to buy or sell cryptocurrencies and crypto securities. All product and company names are trademarks™ or registered® trademarks of their respective holders. The use of them does not imply any affiliation with or endorsement by them. By using this site you agree to our website terms and privacy policy found at watchcrypto.media/terms-privacy

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