Investing in cryptocurrency involves risks which are often a reflection of the potential benefits. But this does not come down to a simple equation, the expression of which would give a caricatured and reductive “more risk = more returns.” Because reducing your portfolio’s exposure to market fluctuations can pay off just as well in the long term. If this makes it possible to avoid cashing in the sharp declines which are often associated with it.
The many DeFi offers are often based on very attractive returns. One way of bringing in the funds that it needs for its development. This is directly and intensively fueled by its highly incentivized liquidity mining strategy. Implementation during the summer very quickly showed its effectiveness with an exceptional increase in the total blocked value (TVL) in its universe.
This has effectively increased by over 650% in just a few months. Which let’s imagine the potential profits made by its investors. But this only if they choose the right land to cultivate to establish profitable farming. Because scams are on the lookout for this unprecedented boom.
A record explosion is driven by intensive agriculture of yield which made pools of liquidity of its various protocols sources of significant profits. This is mainly intended for Yield Farmers and other degenerates (degens) of the DeFi. All fueled by a yield war that shapes and defeats this universe as fast as its rise continues.
The limits of liquidity mining
But this implementation of liquidity mining poses an essential question. This regardless of the risk that it represents both as an investment, but also as a privileged target of centralization attacks that DeFi undergoes repeatedly.
A point that investors in the field seem to ignore, but which can be summed up in the curve of the total value blocked (TVL) in the Uniswap platform. The latter having suddenly fallen following the end of its liquidity mining offers. This with a collapse of more than 50% of its TVL in just a few days. All as a result of the inability of its community to decide on its future.
A scenario that suggests what the current curve of DeFi could give. This once its multiple liquidity mining offers have expired. And which brings the specter of its possible collapse back to the fore. But that would need to be projected over a little more than a few months. And this is not the current state of mind in the field.
A culture of eco-responsible performance
Because the yield cultivation of the fertile lands of DeFi still has a bright future ahead. This is because of the completely artificial watering from which it benefits. And which makes it possible to achieve harvests which should not, however, make us forget their very risky nature. An often ignored reality is nevertheless at the origin of the appearance of new actors on the subject.
This with the implementation of protocols whose goal is to offer more reasoned farming. Projects in which it is possible to modulate one’s risk exposure. A first in the field which tries to tame this speculative jungle. To make it accessible to farmers more concerned with security than excessive yields.
And two main projects are currently emerging within this new scene of the DeFi version of the security of investments. This with quite similar offers which have met with significant success since their recent respective launches. And ironically despite a proven lack of audit and anonymous developers for the most popular of them.
The Saffron.finance project (SFI)
This is the project under the name of Saffron.finance. The latter having collected more than 58 million dollars in TVL since its launch on November 1st. Everything is based on its native SFI token which records. This with a rise of over 1300% in less than a week that has projected its course above $ 1000. While it had started around $ 75.
The official purpose of this protocol is to offer “dynamic exposure” to different levels of risk and return within DeFi. This with a system of three distinct slices divided according to precise characteristics. The potential benefits are correlated with the options defined by the investor.
Existing decentralized earnings platforms expose liquidity providers to complex, code-driven outcomes. Network participants must assess a range of catastrophic scenarios where the resulting condition could wipe out their assets or lead to significant impermanent losses. It is difficult to anticipate the net effect of extreme market volatility or targeted economic attacks. Saffron reduces the set of possible outcomes by giving liquidity providers dynamic exposure . – Saffron.finance
This can range from the least risky AA version to version A which will have to bear any losses on its own. But whose profits are announced as ten times greater than those achieved alone? All generously sprinkled with SFI tokens, the amount of which increases according to the risk-taking.
The Barnbridge Project (BOND)
The second project is the oldest – only a few weeks old – and is called Barnbridge. It benefits from a more official posture. This is because of its implementation supported by well-known players in the DeFi sector. And mainly the founder of the Synthetix protocol and the founder of the Aave structure. But also thanks to a total blocked value (TVL) which approaches 186 million dollars.
All this with an offer based on the same principle of slices and a native token, this time called BOND. The latter did not have the same success as his sidekick. But the quality of a project is not necessarily judged by the curve of its cryptocurrency.
The real difference is Barnbridge’s desire to hedge the high volatility of cryptocurrencies as well. But above all in the fact that it is a structure that has benefited from several audits. This is not the case with Saffron.
A more formal schedule that does not yet allow it to offer all of its services. These can be summarized for the moment in deposits of liquidity providers in stablecoins in two pools which allow earning BOND tokens in return. This may explain the lack of enthusiasm for him because the details are not yet fixed. In particular on the sensitive subject of rewards in BOND tokens that everyone is waiting for to embark – or not – in the adventure.
No, DeFi version farming with zero risk does not exist. But the desire to offer investment options that allow control of the level and exposure are important advances in the field. Because it is this precise point that still prevents a good number of investors from taking the plunge into Decentralized Finance. This even if they are amateurs already registered in the world of cryptocurrencies elsewhere.
The question is how will these projects evolve. And if the protection they claim to offer will be effective and operational over time. But whatever the case, the adoption of DeFi offers will have to go through this kind of tool conducive to more generalized access. Because it cannot be built on a few hotheads more thirsty for improbable returns than for sustainability. Even if it is they who carry the current success.
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