The Real Yield Trend was introduced by Holdstation around August. So far this mechanism has been actively changed and transformed by projects, bringing diversity to the cryptocurrency ecosystem. Making DeFi more secure than the previous Liquidity Mining model.
In today's post, Holdstation uncovers the evolving mystery behind this potential trend.
TLDR:
- GMX - The "backbone" of the Arbitrum ecosystem with a TVL market share of 40%.
- Real Yield makes a turning point for DeFi with the payment of real revenue.
- Delta-Neutral Yield strategy with $GLP creates a new force around GMX.
- Some projects using Delta-Neutral Yield are Rage Trade, GMDProtocol and Umami Finance.
Arbitrum's Backbone
To start, we should learn a little about the "backbone" project that accounts for more than 40% of the Total Locks (TVL) market share on Arbitrum – GMX.
Factors contributing to the success of GMX
- As one of the first projects on decentralized derivatives exchange on Arbitrum.
- No identity verification required.
- No slippage.
- Solution "Platform Owned Liquidity" (POL).
- 100% of platform fees are shared to GMX/GLP at a ratio of 30/70 (encouraging liquidity depth for the platform) – Real Yield.
- Non-inflationary token with Vesting $esGMX mechanism.
However, GMX still has a few minus points such as:
- The oracle mechanism is difficult to adapt
- Does not integrate additional tools about Chart
- Get a high transaction fee (about 0.1% for a Trigger order besides there is a maintenance fee for the order)
- Risk of Impermanent Loss with $GLP
Read more about How To Use Leverage Trading On GMX
Why Real Yield Becomes A New Trend?
Looking back on the past of DeFi 1.0 of the last Bullrun season, projects using Liquidity Mining to reward liquidity providers and Staking make tokens worthless and only increase in price through FOMO then "slow rug". It was a major hindrance to the development of DeFi at the time.
The DeFi industry has now improved through projects that generate real revenue through transaction fees/volume and take away user rewards even buyback & burn. A few good examples such as Trader Joe, Curve Finance, Gains Network, GMX, etc.
Read more about Real Yield Really The Next Trend? What Should Be Noted To Catch This Trend?
Delta-Neutral Yield Strategy
Delta-Neutral Yield is a strategy built from projects on the Arbitrum ecosystem with the core being the $GLP token.
Why recommend this strategy when the APR rewards for $GLP are really good?
$GLP is a token that provides liquidity include assets such as $BTC, $ETH, $UNI, $LINK, and several existing stablecoins. $GLP can be considered as an Index Token and the risk here is Impermanent Loss.
- If all coins/tokens inside go up – $GLP goes up
- If all coin/token goes down – $GLP goes down
- If $BTC increases but all coins/tokens in it decrease – you take a temporary loss from those coins/tokens. Although not suffering as much loss as due to the increase in the price of $BTC on average, it is about that range. But compared to just holding $BTC, this means you are losing.
The Delta-Neutral Yield strategy is proposed to solve this problem. By creating a short $BTC/$ETH position with the same ratio as $GLP assets so that when the price of $GLP is subject to fluctuations you can still receive revenue rewards from GMX with no fluctuations in assets price like Stablecoins.
It can be said that Delta-Neutral Yield is like creating a Hedging order to hedge the price while still receiving $ETH platform bonus from GMX
Delta-Neutral Yield will contribute to the $GLP liquidity incentive for GMX to create liquidity depth and platform users to be able to trade with larger volumes in the future.
So what are the disadvantages of Delta-Neutral Yield projects?
The biggest disadvantage is the dependence on GMX, if GMX cannot maintain the current revenue/transaction fees. The rewards paid to users will be less and less making $GLP no longer attractive. Platforms using this mechanism will not generate revenue and go bankrupt.
Examples: You buy 10 $BNB on Biannce to join Launchpad but do not want the amount of assets to lose money from price fluctuations. What you do will be to use your 10 $BNB to participate and use 10 $BNB to open a Short position with 1x leverage. So your $BNB position in Launchpad will not be affected by any market fluctuations. If a Short position is liquidated ($BNB increase by 100%) then the interest will be based on the amount of Tokens you are rewarded from Launchpad.
New Forces On Arbitrum
Following the follow-up, Holdstation has updated a number of Delta-Neutral Yield strategy construction projects.
GMDProtocol
Currently, GMD has launched Delta-Neutral Yield products such as $USDC Vault, $BTC Vault, $ETH Vault. After user Stake his assets will get back $gmdAsset and get up to 17% APR for each Vault. Users can also cancel their positions by Swap on the secondary market. However, the deposit and withdrawal fees for these assets are quite high, ranging from 0.25% - 0.5%.
Users can also Stake the project's governance token - $GMD for revenue rewards.
Umami Finance
Umami Finance is building Delta-Neutral Yield using $USDC currently this product is still in development and not announced yet.
Currently Umami is still paying out $UMAMI Stakers equal to the amount of $GLP the platform is holding with an APR of about 2.7% - a rather low number. However, Umami Finance still attracts users with non-inflationary tokenomic combined with Real Yield.
Umami’s premiere Delta Neutral USDC Vault is only days away from launch! 👀
— Umami (@UmamiFinance) July 5, 2022
Want to get up to speed? Check out this 🧵 for an overview!
/1 pic.twitter.com/tNby4LiQp1
Rage Trade
Rage Trade is a new decentralized leveraged trading platform on Arbitrum. However, Rage Trade has many advantages when it comes to creating liquidity by building on LayerZero's Omnichain and creating leverage for depositors using Curve Finance's Tricrypto Pool.
Around the end of November, the platform will roll out Delta-Neutral Yield to users under two Vault
Risk On-Vault (15%-25% APR) User will Stake $GLP and reward from $ETH will be accumulated continuously.
Risk Off-Vault (6%-8%): Users will Stake $USDC and this $USDC will be used to open a Short BTC/ETH position to hedge.
You can read more details about the working mechanism of these 2 Vaults below
Rage Trade is offering 2 separate vaults, or what they refer to as tranches
— Atomist 🫐🛸🔮 (@0xAtomist) November 2, 2022
• Senior Tranche (USDC Lender) = 6-8% APY
• Junior Tranche (Delta-Neutral GLP) = 15-25% APY (on USDC)
ℹ️ Tranches are pieces from a pool of assets, that are split up by risk and carry different yields
Summary
Real Yield is transforming from word of mouth in the community and gradually becoming a trend that projects aim for in the future. However, these projects are mostly on Arbitrum and are related to the development of GMX, if a link in this chain (especially GMX) is at risk, it is likely that there will be a "domino" on other platforms. remaining projects. Investors need to consider carefully and make the right decision with their capital.