Flight of the Aggregator
Before the year 2020 started to unfold its sevens seals and trumpets, 2019 was the year of really bad movie remakes or announcements thereof. Like seriously, who thought it would be a good idea to remake Sister Act? Next you are going to tell me they are going to spit out another Clueless? Maybe we deserve pestilence and locust if this is the fine cinematography society is producing these days… So how dear reader does this apply to you and cryptocurrency? Well unless you are a bitcoin maxi with your head buried in the sand, you have probably seen the forking rage that has been running rampant through DeFi. Yes like bad 80/90s movie remakes, the new fad in cryptocurrency is “forking” (copying) another project, changing it ever so slightly and claiming it’s something better. But unlike a movie where the most you will get suckered out of is the cost of an overpriced ticket plus snacks, in crypto a bad remake can cost you little Chad’s college fund.
In the Harvest Finance Discord chat server, the team is constantly asked question(s) like ‘Is this a fork?’, ‘How is it different from Project X?’, ‘Why does the token have value?’. Based on the conversation that generally follows, it appears these questions are being driven by the current “remake” environment which makes it very difficult for those not experienced in yield farming to differentiate between a legitimate project and what will end up being a cash grab by the supposed developers. This is why Harvest Finance is critical for everyone in the yield farming space from noobs to whales, as even the most cautious of investors can get caught up in scams. If this is your first time hearing about Harvest Finance, please read this introduction to the platform and also the Wiki.
The first two questions mentioned above are pretty easy and straight forward to answer. No, this is not a fork/remake of another project. While other very successful projects like yEarn do perform a similar function with their vaults, Harvest Finances’ code/contracts are of their own making and take different approaches to performance strategy, in addition to the differences in tokenomics. A great example of performance strategy differentiation can be seen in the speed at which the Harvest Finance developers deployed the UNI token strategy before any other “competitor”. Now lets look at the third question asked, ‘Why does the token have value?’. The intro article and the wiki both have a fancy strategy flow chart which shows how the platform works, but I am going to make it a little more ELI5 to show you why the token(s) at Harvest Finance are more valuable than 99% of the junk fork tokens that exist today.
Since you made it this far lets assume you can read, so we wont walk through the flow verbatim, but will call out the critical areas. Starting top left, the user deposits assets on the front page of Harvest Finance. The ⛽️ icon shows you where Harvest is saving you time and gas through automation and collectivization of harvesting and compounding, otherwise would require manual daily intervention by the user. The green boxes and the Profit Share is where tangible value to the user is represented, which we will talk about more:
70% of the rewards profit goes back to the LPs and is automatically compounded (APY) - This is the core of the platform. Your deposited funds are in strategies farming rewards tokens like CRV or UNI, the rewards are periodically harvested and sold for a profit and added to the value of the assets you initially deposited (compounding). This part is continuous until the user exists the strategy. With the Harvest Finance system you make an excellent profit without needing to interact with the $FARM token.
The user stakes their fAssets to Earn $FARM - When you deposit on the front page of Harvest Finance you receive an fAsset voucher based on the currency you deposited. Deposit USDC, you receive an fUSDC voucher. When you want to exit your position at Harvest Finance, you return the voucher for your assets plus any profit generated. But instead of those fAssets just sitting idle in your wallet, you can deposit them on the Earn portion of the platform to acquire the $FARM token. The $FARM token which is issued as a reward for staking fAssets, come from an emission schedule of roughly 690,420 tokens over 4 years. The APY range for this reward is currently 30–50%. Once earned, these $FARM tokens can be sold on the open market for instant profit, or staked in the Profit Share.
Profit Share - As you can see in the flow chart and in the above explanation, 70% of profits generated by front page deposits are given to those depositors. The other 30% of profits are converted to USDC and used to market buy in masse the $FARM token, which are then sent to the Profit Share pool to be distributed proportionally to anyone staking $FARM tokens in this pool. Not only can you compound the $FARM tokens earned here, the $FARM earned in the fAsset staking pools can be compounded here. Directly speaking, the value of $FARM comes from the profits generated in the various deployed strategies. The more people who deposit funds on the front page with Harvest Finance means more profits generated by the platform, which means more $$$ for those staking $FARM. It is also EXTREMELY IMPORTANT to understand the $FARM paid by the Profit Share is market bought, and not artificially stimulated profits by token emissions.
🚨(Alpha Leak)🚨 But ser muh 30%? If your brain hasn't melted by now with the revelation that is Harvest Finance, you might have the one final nagging question of ‘Well if I do all the farming myself and not ‘giveaway’ a 30% cut to some token holders isn't that more profitable?’ and the clear cut answer is No! Quick side track - Are you up to speed on how APY really works? If so, then you remember all that time and gas it costs to compound which eats at your profit. Now its time for very simplified napkin math:
$5000 invested in the Harvest Finance UNI strategy at 50% APY (daily compound) is equal to 40.569% APR, times $5000 invested means you are pulling in $2028 annually, or $5.55 daily gross profit, $3.89 after the 30% Profit Share reduction. But we must also add in the $FARM earned for staking fAssets which is roughly 35% APY avg across the strategies, since that is a benefit of the platform which stacks with your base earnings. Using the same calculation, a 35% APY is equal to 30.022% APR, times $5000 is $1501 annually or $4.10 in FARM daily. Total daily rewards of the two earnings is $8.99. (With the cost of gas socialized, maybe that ticks down to $8.95…)
Remember the solo farmer question who would be pulling $5.55 a day profit and no 30% rake? How much do you think it costs in gas to compound Daily in UNI? With at least 3–4 transactions needed at $3 gas cost each, it would cost a solo farmer outside of the Harvest Finance platform $12 to compound daily or a NET LOSS of $6.45. Ouch!
To wrap all this up in TLDR fashion; there are three ways Harvest Finance makes you money, with two of them directly tied to the performance of the strategies and platform itself: APY % on base deposits, FARM rewards, and the Profit Share. And to ensure long term value, Harvest went biblical and burned anything on the farm that was not bearing good fruit, including free rider pools and emissions.
· Join the 👩🌾 revolution at Harvest.Finance
· Follow project updates 📰 on Twitter
· Chat with other farmers on the Official Discord 🤝
· Build your 🧠 at the official Wiki
· More project info at Medium 📜