Yield farming was undoubtedly the biggest frenzy in the DeFi world this year. With the rise of liquidity mining, investors had access to crazy high APYs, even as high as 2500% in SUSHI or YAM farming, for example.
Following this financial upheaval, DeFi markets are going through a process of maturation, where investors, DApps/Dexs, and other platforms are looking for a more strategic approach, powered by risk management and efficient returns.
APY Finance is a community-oriented platform that blends high APYs provided by yield farming and an upgraded mechanism of risk management.
Explaining Yield Farming
Yield farming is a concept that encompasses a set of strategies to maximize the rate of return on invested capital by leveraging different DeFi protocols.
This way, the purpose of investors (farmers) is to expose themselves to the highest yields by switching between strategies, which commonly involve several decentralized protocols.
Once a strategy stops generating maximized returns, players start to move their funds around. Hence, the golden rule of yield farming is to keep chasing the pot of gold with strategy and resilience.
Yield farming is an activity that requires constant study, battle-tested investment skills, and willingness to stay on the game. To evaluate the effectiveness of a strategy, farmers are always watching APY (Annual Percentage Yield) levels, comparing and changing protocols as needed.
It is realistic to say that all the frenzy surrounding yield farming started when Compound began to distribute higher rewards for users providing assets with the biggest APY.
Since then, these strategies gained a lot more prominence- especially after SushiSwap forked Uniswap using a profitable “vampire attack” strategy.
What Is APY Finance?
APY Finance is an Ethereum-based platform built on top of the concept of a robot-advisor that executes complex yield farming strategies for users. The project aims to automate yield farming to get users maximized returns with risk-adjusted strategies.
The purpose of APY’s smart contracts is to route users’ funds to the latest-and-greatest yield farming strategies, using a continuous and intelligent approach.
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This way, the main idea is to counterbalance all the craziness involved in the explosion of yield farming with reliability and well-structured mechanisms.
Instead of building another fork on a third-party liquidity pool, APY Finance is working on a permissionless platform focused mainly on accessibility and long-term reliability.
In layman’s terms, the goal is to optimize rewards while lowering the risks for users who are not DeFi specialists.
Dig Into It
DeFi is an inherently complex environment, an issue that increased a lot since yield farming took this scenario by storm.
APY Finance wants to build a unique automated platform capable of mitigating risks associated with yield farming while creating a seamless and user-friendly experience for users.
The platform plans bring an ease-of-use automated tool for anyone interested in yield farming strategies, removing entry barriers such as:
- Complex jargon
- Daily grind to obtain information (news, protocol upgrades, price feeds, etc.)
- Time commitment
- High costs
Speaking of lowering high costs, this is one of the main focuses of APY Finance. Unfortunately, yield farming is becoming way too expensive with gas prices, especially for undercapitalized users.
APY Finance has a single liquidity pool empowered by a multiple-strategy portfolio. Hence, users have one place to deposit their tokens, which simplifies the process. All liquidity in this pool gets deployed atomically to the APY’s portfolio of strategies, reducing gas costs dramatically.
This way, users get exposed to a vast range of yield farming strategies with low-cost deposits and low-cost withdrawal.
Focused on decentralization and community-based effort for decision making, APY Finance aims to reach a DAO (Decentralized Autonomous Organization) status in the long-term.
At its first stage, the APY platform will rely on DeFi experts and seasoned software engineers. These individuals will be responsible for codifying yield farming strategies and monitoring for time-sensitive incidents.
Once the platform becomes more stable, it will enter a process of progressive decentralization to become fully community-owned.
This way, the platform will rely on a governance token called APY.
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APY holders will be the first able to propose and vote on changes that will affect the DeFi landscape, such as changes regarding Balancer or Uniswap pools, for instance. Such changes can be pushed and rewarded by the community.
From this point on, APY holders will have the power to propose and vote on platform parameters, including strategy risk score changes and yield allocation. These risk scores will reflect changes in the DeFi landscape.
Once the platform has reached a full DAO status, the community will be able to govern the implementation of strategies, including the addition or removal of different maneuvers.
Liquidity Mining Program
On September 29, APY Finance started its first liquidity mining rewards program. Users were allowed to start depositing their tokens in early October, following the launch of the first version of the liquidity contract.
At this initial phase, the incentivized liquidity contract will help to bootstrap Total Locked Value (TVL). Hence, front-loaded liquidity will help the platform’s system to achieve economies of scale saving when yield farming strategies go live on the main launch.
So far, users can deposit stablecoins like DAI, USDC, and USDT into the contract to receive APT tokens in exchange. These APT tokens will act as an IOU token, representing the user’s share in the liquidity pool.
This approach is similar to that used by Balancer (BPT tokens) and Curve (LP tokens). Users will automatically mine APY tokens by holding APT tokens. Until its official event takes place, APY tokens will not be available to the public.
APY Finance is a yet-to-launch project that aims to create an automated platform to function as a robot-advisor to execute complex yield farming strategies for users.
The goal is to ensure the most profitable APY rates across different protocols while mitigating risks associated with yield farming. Also, the platform wants to create a seamless and easy-to-use experience to attract more people to DeFi in the long-term.