A deep dive into DeFi’s new and old yield farming strategies, with steps to get started.
With yield farming becoming a foundational strategy within the DeFi ecosystem, it’s important to recognize one of the OG yield farming protocols in the game — long before “farming” was a meme.
Synthetix is a token-trading platform that provides exposure to cryptocurrencies as well as real-world assets like commodities, stocks and shares via synthetic assets. Their permissionless derivatives protocol offers one of the most diverse ecosystems for yield farming.
The best part is that users don’t necessarily have to be bullish on SNX.
Prospective farmers can actually leverage the protocol beyond just staking the network’s native asset or strictly earning SNX. Instead, they can tap into any of the protocol’s incentivized liquidity provisioning programs, giving participants multiple opportunities to earn an attractive yield with exposure to a wide range of different assets.
In this article, we’ll explore various yield farming strategies that can be tailored depending on your investment thesis. Whether you’re bearish and want to hold USD, a hyper bull holding onto idle ETH, or believe Synthetix will proliferate into a global derivatives protocol with billions of dollars in synthetic assets, there’s a yield farming opportunity for you.
For anyone that decides to yield farm with Synthetix, you can track all of these earnings directly in Zerion!
Disclaimer: With high returns, comes risk. Please do your own research and due diligence and understand the potential risks associated with yield farming. Whether it’s smart contract risks, economic risks, or governance risks, it’s important for users to recognize that there’s always a possibility to lose their capital when exploring the wild west of open finance. DYOR!
All returns are calculated in USD and are subject to change.
- Estimated return: ~34% APY in SNX + trading fees
- Outlook: Bullish on SNX
One of the most well-known yield farming opportunities with Synthetix is staking SNX (their native token) to earn trading fees in sUSD (a synthetic dollar) in addition to a slice of the protocol’s native inflation.
The interesting piece to this is when you stake SNX, it acts as a collateralized position in the system, allowing stakers to mint up to ~10% of their collateral’s value in sUSD. Similar to Maker, this provides users the opportunity to leverage their crypto because upon receiving the sUSD, they can use those crypto dollars in any way as they see fit. This could include exchanging the sUSD for traditional fiat, BTC, ETH, other DeFi tokens or even any of the dozen Synths supported on the protocol.
It’s important to note that in order to reclaim staked SNX, you’ll eventually need to pay back the sUSD debt.
- Go to mintr.synthetix.io
- Stake your SNX by “Minting sUSD” on the Home page
- Once you’ve received your sUSD, you’re free to use it as you’d like!
Balancer’s sETH | WETH Pool
- Estimated Return: ~43% APY + trading fees (calculate earnings here)
- Outlook: Bullish on ETH + Bullish on BAL
With Synthetix recently deprecating the sETH | ETH Uniswap pool incentives, ETH holders are forced to look elsewhere in order to earn a yield on their idle ETH. While it’s not directly incentivized by the Synthetix protocol, the Balancer sETH | WETH pool offers a viable alternative.
Users can deposit sETH and WETH into Balancer to earn trading fees while simultaneously earning BAL incentives. The most attractive piece about this yield farming play is that it theoretically eliminates impermanent loss — one of the most detrimental side effects to providing liquidity with AMMs. As a result, the Balancer pool now offers one of the best opportunities for users sitting on idle ETH as it offers a 43% return when factoring in BAL rewards.
If you’re not bullish on BAL, you can simply sell your rewards on a weekly basis and purchase ETH to deposit back into the pool to compound your weekly returns or sell it for any other asset of your choosing.
- Go to sETH | WETH Balancer Pool page (note: you’ll be required to wrap ETH into WETH)
- Click on “Add liquidity”
- Deposit equal parts sETH | WETH or only one asset by clicking “Single Asset”
- BAL will be earned and sent directly to your address on a weekly basis
- Estimated Return: ~19.37% + Trading fees + CRV
- Outlook: Bearish or neutral on crypto assets, bullish on SNX, bullish on CRV
The Curve sUSD pool is one of the best opportunities for those looking to earn a high-yielding return while their underlying holdings remain stable. Given that users are depositing crypto dollars into Curve’s Automated Market Maker, users are no longer exposed to volatility in crypto assets — for good or for bad.
With that in mind, the Curve sUSD compensates for this by incentivizing the pool with over 48,000 SNX per week, the highest on the protocol in terms of liquidity incentives.
What’s more, with Curve launching its own native governance token which will be distributed retroactively, users who provide liquidity to Synthetix’s Curve sUSD pool will not only receive trading fees and SNX incentives, but also CRV governance tokens.
If you’re interested in depositing liquidity into the Curve sUSD pool follow these steps:
- Go to the Curve.fi sUSD pool and deposit your stablecoins of choosing
- Once you’ve received your Curve LP tokens, visit Synthetix’s Mintr and go to LP Rewards
- Unlock sUSD LP tokens by signing a transaction then “Stake Tokens”
- Once confirmed on-chain, you’ll be able to claim your SNX rewards whenever you’d like
- Estimated Return: [?]
- Outlook: Bullish on BTC, SNX, REN, BAL, and CRV
The newest incentivized liquidity pool to the Synthetix ecosystem features one of the most complex yield farming opportunities we’ve seen to date. While the pool will only be tested for 10 weeks, it offers an attractive basket of tokenized incentives for any prospective liquidity providers.
Users who elect to provide liquidity to the sBTC Curve Pool will not only receiving Curve trading fees but also:
Behind the scenes, both Synthetix and Ren have created a Balancer pool where SNX and REN incentives are allocated. Therefore, users will receive BPT tokens on a weekly basis which represents the underlying SNX + REN rewards. Since those rewards are in a Balancer liquidity pool, users will also receive BAL governance tokens.
The last piece to this multi-asset yield farming is the addition of CRV’s native governance token. Anyone who provides liquidity to Curve will receive CRV retroactively with the token set to launch in the coming months.
Given how many tokens are involved with this liquidity provisioning opportunity, it’s extremely tough to calculate the rewards.
To capitalize on this yield farming opportunity, follow these steps:
- Deposit sBTC, renBTC, and/or WBTC to the BTC Curve liquidity pool (found here).
- Stake your Curve LP tokens into Synthetix’s Mintr
- CRV and BAL incentives will be distributed directly to your wallet upon launch of each respective public distribution
- BPT tokens (which are SNX and REN) will accrue automatically and be available to claim in the LP rewards tab in Mintr.
Synthetix offers one of the most diverse ecosystems for yield farming in DeFi. Users can have exposure to a range of assets including BTC, ETH, USD and SNX while being incentivized in SNX and other tokens for providing liquidity.
Given that SNX was the best performing DeFi token in 2019, any prospective yield farmer should be attracted to the opportunities.
While tracking all of these rewards may seem like a headache, Zerion makes it easy. Simply connect your wallet to Zerion and you can view all your incoming rewards directly on the dashboard!
For any questions on how to use Synthetix with Zerion, feel free to reach out.