Alright i'll keep doing my research then.

I see what you mean regarding the tax implications. I've only recently been getting returns on my crypto within blockfi, so I haven't actually had this (good problem) until relatively recently. That is a solid point. I'm still going to owe taxes on the ETH based on the value it was at the time blockfi kicked me the interest, and it could lose 70% of its value but i'm still on the hook to the IRS for much more.

I'm not sure how it's better from a risk-management perspective.... it seems like if your stablecoins are locked up in ETH smart contracts you're still gambling on the same thing (the ethereum network itself.)

Appreciate the reply, i'm pretty overwhelmed atm figuring all this stuff out. Might have to take a break from grinding poker and just dive deep for hours every day for a month. Might be more +EV than grinding poker.

Good question and good answer, thanks for breaking that down for me 2shae

Ya reading this made it all click for me. This seems like the way.

Thanks again guys for the hand holding.

Somehow i've got a relatively nice size bag just buying into btc and eth for the past 3 years every single week. It's grown so much, and my belief in the tech has grown right alongside with it. I'm just so, so far behind on educating myself on DeFi. ****.

it's diversified because USDC/USD has no price volatility whereas ETH/USD has significant price volatility.

obviously them getting frozen/drained from a contract is a risk with all coins, and so diversifying which contracts your coins are in is another way to diversify/risk manage. Do note that a lot of contracts are based on Sushiswap Masterchef and Synthetix Mintr and so be aware of being in multiple ~identical contracts.

newb defi question:
how much of a concern is inflation of a token that I am receiving from farming? For example, I am receiving a token that according to the tokenomics schedule is being distributed over a few years, inflating 233% in year 1, 40% in year 2, and down from there. Does this mean the token will become less valuable over time (and thus my 200% APY is a mirage), or should this theoretically be priced in already to the current price?

This seems to be the standard format of all these high apy projects: distribute tokens of questionable value to create an elevated apy. If you sell them as they accumulate maybe you get a decent return. Do you want the token or do you want the return? Probably the return.

yeah im just thinking from a rational markets standpoint, if everyone knows the inflation is coming, it should already be built into the price, no?

im also wondering why these tokens are valuable in the first place but I suppose that is a whole other can of worms

inspectorgadget -

I'm in the same boat. Built up a sizable BTC/ETH portfolio over the last few years but haven't taken the deep dive into DeFi and farming yet. I'd like to keep my tax return simple this year with a few sales near the (hopefully) top of the market.

The longer term plan (late 2022) is to relocate to PR where 0% capital gains, dividend or interest income really makes the farming strategies worthwhile. I don't know if I'll ever go full-ape but the basic strategy I'm formulating would be something like:

1. Collateralize my BTC at a safe LTV for stablecoin yield generation
2. Stake my ETH and collateralize at a safe LTV for stablecoin yield generation
3. Remainder of portfolio will go into DPI which I'll actively farm with

I haven't looked into the particulars too much yet but that's my basic plan. The yield should be more than enough to live off of and any excess amount I'll use to build my DPI holdings which will be my third largest position after BTC/ETH.

2shae - how does that look on the risky/rekt scale?

Ya I'm thinking that's pretty much my plan too except i'm probably not going to move to PR. I need a pretty simple strategy because, frankly, this **** is hard to understand. I am just a simple poker player.

DPI == DeFi Pulse Index? I haven't figured out how to get exposure to that yet. I was looking at the pie dao where they offer a token that represents a broad basket of defi tokens.

I should look into collateralizing my BTC/ETH right now for stablecoin generation since they're already in blockfi anyway. IDK why I haven't done that yet. I've been a little scared of some crazy price movement downward and losing it all, but I think the risk of that is extremely low. In a podcast with the blockfi CEO I watched he said they always contact people first to give them time to pay back the loan before they liquidate any collateral.

Uniswap v3 looks bad for me as a liquidity provider...

Fees for liquidity providing no longer autocompound in token and most likely trigger a less favourable tax treatment. ‘Liquidity ranges’ offering capital efficiency just means more computation - without a quant level understanding people are going to get rekt. When all the peasants have been rekt all that will be left is bots run by pros.
‘The leverage’ of the system is going to expand enormously and we know how that generally ends up...

TokenSets offers a DPI set. Easy setup, just need ETH. Risks abound, but c'est la vie.

Then take that DPI and farm it 1.75x on alpha homora

any truth to NFTs just being a marketing ploy for ETH?

like the braintrust of ethereum concocted this nft plan to help market the underlying infrastructure?

What is the advantage of staking borrowed funds into a LP pool, assuming the loan is over-collateralized, instead of just staking the entirety of those funds in the first place?

some coins are good to farm with (stables), some coins are bad to farm with (btc also stuff like yfi). If you wanna maximize returns it is often correct to use those coins as collateral and farm with stablecoins.

I can tell you from first hand experience: sweating the health factor of the loan is not fun and effected my quality of life in a negative way even though I was far away from liquidation.

Can you provide me an example where it would be correct to borrow to farm? Here is the example I have atm:

1.) Use half of stable to buy asset X and farm Stable / Asset X pair at lets say 100% APR
2.) Post asset Y as collateral, borrow stable at 35%, use half of this to buy asset X, farm stable/asset X at same rate

I see people doing option 2 and I am wondering why

(edit: I suppose option 2 gives you exposure to asset Y but I cant imagine that being worth it?)

It is my understanding you can stake your ETH as a validator to earn those rewards and there are/soon will be services to take out loans against your staked ETH which you can then use buy/lend stables.

So you get exposure to ETH + 9-10% stake rewards on entire balance + >20% yield on stable lending on the amount of your loan.

If you want long term exposure to ETH then it seems like a pretty sweet gig.

none at all, sounds like something Brad Mills or Peter McDoormat might say.

Removing the price risk and being ~delta neutral on the asset you're farming with, keeping exposure to assets you want exposure to while farming something else, avoiding/deferring tax chop. Simple example:

Some months ago Tether FUD was at all time highs, but lots of farm opportunities would expose you to USDT downside/collapse cases. Any Curve pool which includes USDT would go to 0 if USDT went to 0. Say you wanted to farm with $500k in one of these pools to earn CRV, but you don't want to take on your perceived risk of USDT collapse. One way you could accomplish this is:

1) Supply ~$700k+ of [WBTC, ETH, USDC, DAI] to Compound
2) Borrow 500k USDT against that collateral
3) Use borrowed USDT to provide liquidity in Curve pool

In this case, you decrease capital efficiency, take on basis risk (borrowing USDT is not free), but eliminate USDT price risk. If USDT goes to 0, the 500k USDT you borrowed would also be worth 0, meaning you could repay the loan *for free*, and get all your collateral back. You'd also have all the CRV yield you earned for providing that liquidity. Doing this allows you to keep exposure to your preferred mix of assets, and may avoid creating taxable events that would be created by selling instead of borrowing.

Plenty of other situations like this where you need to stake shitcoins or stake Uniswap LP tokens that are <shitcoin>/eth pairs, where borrowing the shitcoin significantly decreases your price risk wrt said shitcoin's delta (it would be nonzero in this case due to how AMMs work).

Was looking for the mathematically correct point to claim rewards and re-stake and found this formula: https://www.reddit.com/r/cosmosnetwo...s_transaction/

Seems reasonable but just wondering for those more experienced in yield farming than me if it is legit.

Let's say you have wBTC worth X$ that you can farm with at 15%. You find a stablecoin farm that offers 100%.

You go to compound and use your wBTC as collateral. You take out 50% of X in stablecoins at 6% APY.

Old APY: 15% on X
New APY: 100% on X/2 -6% on X/2 = 47% APY

what's the minimum you'd need to make staking a worthwhile endeavor?

right but the other option is to sell your wBTC and put it all into the stable farm and earn 100%

Already addressed in my post above why you may not want to do this:
-maintain BTC beta instead of stablecoin price stability
-defer taxable events incurred by selling BTC for stablecoin
-trading fees of selling wBTC (quite high on DEX, not much liquidity on american exchanges)

In addition, it's easier to understand when it's not BTC vs stablecoin. In reality a lot of farms require owning DeFi alts, or LPing <DeFi alt>/ETH pair on Uniswap/Sushiswap and then staking the LP tokens. Borrowing the volatile alt against a basket of BTC/ETH/stablecoins is often quite attractive mathematically because you earn high yield with 0 (if single asset staking) or low exposure (if LP tokens) to the alt.

Whats the case for sushi>uni, or vice versa