Revenue aggregator Lego: how long can revenue last? What are the advantages and risks?

The way of defi 2021-06-19 02:33:47 阅读数:1,005

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revenue aggregator lego long revenue

Original title :《 Imperial College of technology released DeFi A research paper 《SoK: Yield Aggregators in DeFi》》

writing : Captain Hiro

This paper gives a brief introduction to the thesis 「SoK:Yield Aggregators in DeFi」 It is summarized , It's the University College London blockchain Data Center (UCL CBT) The results of a joint study with Imperial College London .

DeFi

since 2020 Decentralized finance in the summer of 2007 (DeFi) Since the outbreak ,Yield Farming It has always been a very popular activity for cryptocurrency holders .

By 2021 year 5 month ,DeFi The asset management agreement in locks in more than 30 Billion dollars , As of the time of writing, the lock-in amount has reached nearly 20 Billion dollars .

Although there are many ( A scam ) The project promises users huge profits in a short time , But things like  Idle Finance、Pickle FinanceHarvest Finance  and  Yearn Finance Etc. are trying to provide DeFi Communities build a sustainable source of revenue . It makes me want to know :

  • Where do the benefits come from ?
  • How much of LEGO's revenue from aggregator's use of money ?
  • All these aggregators ( If any ) What's the general mechanism behind it ?
  • What are the benefits and risks of putting your money into the revenue aggregator ?

I work with UCL blockchain Technology Center Jiahua Xu And Imperial College London Toshiko Matsui Co authored an article on DeFi The revenue aggregator in (Yield Aggregators) The paper of , This paper answers all the questions raised above . We propose a generalized revenue aggregator framework . Now let's take a closer look at DeFi The most profitable part of , namely Yield Farming Well .

brief introduction

As you said before me about automatic market makers (AMM) As I read in my article , since 2020 Since the summer of 2000 ,DeFi Explosive growth .Yield Farming yes DeFi It's one of the most interesting applications in . This concept was originally developed by Synthetix Introduced , But as the Compound The governance token of COMP Release and distribution of , This concept has received more attention .

From then on ,Compound The participants in the loan activities get the newly cast COMP Token as a reward , This process became known as 「 Liquidity mining 」.

Until today, , This process is still being replicated by other projects , It encourages developers to find a way to combine rewards from different protocols .Yield Farming It is in this context that . In this context , Builds on the DeFi Aggregation protocols on top of existing projects are trying to do Yield Farming People from all over the world provide one-stop solutions .

Where do the benefits come from ?

There is no such thing as a free lunch , So where do these revenue aggregators come from ? It seems to have three main sources .

Loan demand

As the demand for encrypted asset loans grows , Lending rates will go up , This will lead to higher income for the lender . Especially in a bull market , Despite the high interest rates , But speculators are still willing to borrow money , Because they expect assets that are long with leverage to appreciate .Aave and Compound The annualized return of the stable currency is 2021 year 4 Month arrived 10%, At that time, the market sentiment was very optimistic .

Mobile mining projects

Early participants often received governance tokens representing the ownership of the agreement . It's an incentive to put money into the deal , Because reward tokens usually have additional governance functions . This function is often considered valuable , Because token holders will have a say in the future strategic direction of the project . essentially , Early users are rewarded for helping the project grow and taking the risks that may arise in the early stages of smart contracts .Sushiswap and Finance Finance This is the case .

Revenue sharing

Some tokens empower users to get part of the revenue they get through the agreement . One example is the liquidity provider in the automated market maker (LP) Tokens, ( About it , You can read more here ). The more people are trading , The higher the return of liquidity providers . Another revenue share token is xSUSHI.Sushi The holder of the token will receive xSUSHI In return , This will give them Sushiswap Income from agreement transactions 0.05%.Vesper Finance The governance token of VSP You can include vVSP pool , The pool captures Vesper The resulting contract 95% The cost of .

The mechanism behind the revenue aggregation strategy

Now we know where the benefits of aggregators come from , How do users get revenue through revenue aggregator ? Let's take a hypothetical yield aggregator 「SimpleYield」 As an example to explain the following chart .

DeFi The mechanism of income aggregator

In phase 0 in , Money is put in smart contracts . Although newer agreements allow multiple pools of assets to emerge , But usually a pool contains only one asset .

Users put assets in a pool , In return , They will receive tokens representing their share of the pool's value . for example : take # ETH Deposit in SimpleYiel dETH pool , And receive the returned #syETH Tokens, , Represents the total value of the pool x%.

In phase 1, The money in the pool is used as collateral , adopt Compound、Aave or Maker Wait for the loan platform to borrow another asset . This stage is not always necessary , You can skip . The main purpose of this step is to allow the use of another asset ( Instead of the original collective asset ) perform Yield Farming Strategy . for example : stay SimpleYield ETH Users in the pool recharge ETH You can put Maker, So as to borrow the stable currency DAI.

Stage 2 Including revenue generation strategy , Different protocols can vary greatly in complexity . The figure below shows , The inputs to this stage are either assets that do not try to yield ( Red coin ), Or assets that generate revenue ( Green coin ). as time goes on , Green money generates revenue and keeps growing . for example :SimpleYield ETH Pool use ETH borrow DAI, Now you should DAI be used for Compound, There the aggregator goes through cDAI Tokens and COMP Tokens make money , As Compound Part of the liquidity mining program .

DeFi The execution of a single policy .SC Smart contract

In the final stage , That is the stage 3, Stage 2 The proceeds generated will sell the assets of the original pool on the open market , And back to the stage 0, In phase 1 And stages 2 Re deploy in . Pool increases the value of existing shares without issuing new shares . for example : In phase 2 Generated in the COMP The token is in Uniswap Sell it back ETH, And then back to the stage 0. User generated #syETH Tokens now have more value , Because the value of the pool does not generate new syETH There has been growth in the case of tokens .

Strategy presentation

Now we've learned how revenue aggregators usually work , The main point of the agreement is in the second stage , That is, the stage of actual income generation . Let's take a look at some Yield Farming An example of strategy . Be careful , The example described here is relatively simple , And these strategies can be much more complex in reality .

The evolution of pool value is simulated in a controlled market environment . The simulation results are given in this paper .

Simple lending

The example used in the previous section is a simple loan strategy . As part of a mobile mining project , Money is deposited in loanable funds (PLF) agreement , To earn interest and manage tokens .

Revolving loans

The strategy is designed to borrow through the cycle , Maximize the number of governance tokens obtained by the liquidity mining program . The aggregator can put DAI Deposit loanable funds , Borrow more with this deposit DAI, And put the DAI Again, to the loanable funds . This cycle can be repeated many times , But the simulation based on supply and interest rates shows that , This strategy can be very dangerous if you borrow too many times .

Using automated market makers LP Token for liquidity mining

Automatic market making (AMM) LP Tokens have benefits , Because transaction costs remain with automatic market makers In the pool . While automated market makers are still running liquidity mining programs , In addition to the user's income from the transaction costs , You'll also be rewarded with governance tokens . This strategy is also considered relatively risky , Because when the price of the underlying asset starts to change , Gratuitous losses can eat up a lot of rewards .

Compare the revenue aggregators that have been tested in actual combat

DeFi Summary of major existing and early income aggregators - 5 month 1 The data of

Idle Finance

Idle Finance It's one of the first yield aggregation agreements , This agreement is made on 2019 year 8 Month launch .Idle At present, only simple Lending strategies are used , In loanable funds (Compound, Aave, Fulcrum, dYdX and Maker) We're going to allocate money on the Internet . The agreement has 「 The best return 」 and 「 Risk adjustment 」 Two strategies . The first is to seek the best interest rate through the above platforms , The risk adjustment strategy considers the risk factors , Further optimize the risk return score .

Pickle Finance

Pickle On 2020 year 9 Month launch , The agreement provides revenue through two products :Pickle Jars (pJars) and Pickle Farms.Jar yes Yield Farming robot , It can get a return from the user's money , and Farm It's a mobile mining pool , Users can use different types of assets to staking To obtain a PICKLE Governance token .pJars Use 「 Auto market makers LP The liquidity of token mining 」 Strategy . Farmers recharge Curve LP Token or Uniswap/Sushiswap LP Tokens, , These tokens are used to generate governance tokens through mobile mining projects .

Harvest Finance

Harvest On 2020 year 8 Month launch , The agreement goes through its own FARM Liquid mining projects offer compound interest . There are two main strategies for this protocol : Single asset strategy ( Include 「 Simple lending 」 Strategy ) and LP Token strategy ( Include 「 utilize AMM LP Tokens tap liquidity 」 Strategy ). The income generated is 30% Used to buy back... In the open market FARM, And flow to FARM Holder of , Instead of the original pool .

Yearn Finance

2020 year 7 month , The world's largest revenue aggregator has finally come out .Yearn It offers a variety of products , This paper considers Earn and Vaults.Earn The pool uses 「 Simple lending 」 Strategy , An agreement to deposit assets in loanable funds at the highest interest rate .Vaults Allow for more complex policies .

DeFi Total value lock in , The data come from  https://defillama.com/home

Advantages and risks of revenue aggregators

advantage

  • Farmers don't need to take the initiative to develop their own strategies , But you can take advantage of workflow invented by other users , Change your investment strategy from active to passive .
  • Because cross protocol transactions are conducted through smart contracts , The transfer of funds is automatic , So users don't have to manually transfer funds between agreements .
  • Because the money is concentrated in the contract , So it reduces the number of interactions , Reduced interaction costs , such gas The cost is diluted .

risk

  • When Yield Farming When a strategy uses assets as collateral to borrow other assets , Even when they only provide assets to loanable funds agreements , The risk of borrowing will always exist . In the case of high utilization ( High borrowing / Funding ratios ), When many lenders pick up the line at the same time , Some of them may have to wait for some borrowers to repay their outstanding loans . That's what's called 「 Liquidity risk 」. When borrowing money , When the value of collateral is below a predetermined clearing threshold , There is a 「 Liquidation risk 」.
  • because Yield Farming The strategy is usually based on a series of Lego blocks , So there is portfolio risk . Technical and economic weaknesses provide attractive opportunities for malicious hackers to take advantage of .
  • The benefits of a strategy are usually determined by many factors , For some strategies , This creates an unstable annualized return . By the gratuitous loss 、 The fluctuation of annual yield caused by the low trading activity of automatic market maker or the price change of governance token is not attractive to many potential investors .

summary

In the past year , A lot of revenue aggregator protocols have emerged , Although the overall framework behind them is similar , But they all have their own style .Idle Finance On 2019 The first version of the product was launched in , The product deposits money into PLF, Offer the best interest rate at a given time .

suffer Compound The inspiration of mobile mining projects ,Yearn Finance stay 2020 year 7 The first mock exam has expanded this pattern , In their Earn More complex strategies were invented at the same time as the product was released , be called Vault. With the emergence of more forms of mobile mining projects ,Harvest Finance and Pickle Finance Used exclusively late last summer LP Token for Yield Farming.

Yield aggregators used to be 、 It's still using DeFi An attractive way to collect returns . But how long can this benefit last ? As we can see , There are three main sources of revenue . Although the research on revenue sustainability is worth publishing a separate paper , But we can think that the events from the local token distribution income are relatively short .

Once the token distribution plan is completed , This benefit will be consumed . Although the new agreement can flourish with the new token allocation program , But this source of revenue seems unlikely to be sustainable . In this regard , Borrowing demand may be more sustainable , But it's highly dependent on market sentiment , Especially for unstable currencies . The benefits of the revenue sharing token seem to be the most lasting , Especially if DeFi Can maintain the recent growth rate .


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