Yield farming, or liquidity mining, is a DeFi investment that allows crypto holders to earn passive income by providing liquidity to decentralized protocols or platforms.
Typically, to maximize their yield, investors usually look to auto-compound their interest. Auto-compounded interest eliminates the high costs and inconvenience going along with manually claiming and reinvesting interest. That was a stellar moment for yield optimizers as they offered ways to earn even more money in a more efficient way.
Beefy leveled yield optimization up. How? It automatically reinvests earnings on compounded interest, and it optimizes yields using a variety of optimization functions for their unique vaults (mooVaults).
Beefy: The Essentials
- TVL: $195.5M
- TVL Ranking by Yield Aggregator: #2
- Average APY: 40.93%
- Blockchains: Arbitrum, Optimism, Ethereum, Polygon, BNB Chain, Fantom, Avalanche, Base, Cronos, Polygon zkEVM, Canto, Metis, Kava, Moonbeam, Moonriver, Fuse, Aurora, Celo, Oasis, Harmony, Gnosis, Heco.
Beefy is a multichain yield optimizer deployed on 23 different chains. As a yield optimizer, Beefy offers a wide range of vaults where users can deposit their assets and automatically earn interest from their compounding interest in a process called auto-compounding.
Beefy offers three different vaults:
- single-asset vaults;
- stablecoin vaults;
- liquidity pool (LP) vaults.
There is no fixed number of vaults as new vaults are regularly added. Vaults pass an internal audit by Beefy's strategists before they are offered on the platform. It’s important to point out that Beefy’s mooVaults have many truly unique token pairs not available elsewhere.
Vaults are investments that have a particular set of strategies for yield farming. They use automation to continually invest and reinvest deposited funds, which help to achieve high levels of compound interest. By using a Beefy vault to compound your gains, you save thousands of transactions with their associated gas costs, and precious personal time. Instead of manually harvesting and selling rewards, buying more tokens, and reinvesting that continuously, a vault does all that automatically at a high frequency.
Vaults are the core of the Beefy ecosystem. In a Beefy vault, you earn more of the asset you stake in it, regardless if this is a liquidity pool (LP) token or a single asset. For example, vaults where one can stake BTC-BNB LP will result in more BTC-BNB LP over time, effectively growing your share in the liquidity pool and thus allowing for more and more fees and rewards over time.
Beefy’s vaults are intuitive. The user can choose to deposit from a large variety of assets and use Beefy’s ZAP feature. Beefy’s ZAP uses 1 Inch or Kyber to sell the deposited token at the best rate, purchases the vault token or tokens, and builds the LP upon deposit. Beefy ZAP gives users the best value upon entry and exit of Beefy’s vaults.
Source: Beefy's Docs
Single-Asset Lending Vault
Users staking in lending vaults will deposit one type of token into the vault. In the backend, the protocol borrows and lends the asset to increase capital and provide the highest possible yield. This strategy allows Beefy to discover the optimal auto-compounding rate.
BIFI is Beefy’s utility and governance token (explained more under BIFI Token). Staking BIFI entitles the staker to own a share of the earnings Beefy collects on its vaults. Beefy offers a special vault that allows BIFI holders to stake BIFI in a pool that offers an APY on the fee earnings generated from BIFI vaults. In other words, BIFI stakers would earn passive income from the fees Beefy generated from its vaults.
Beefy Boost promotes promising projects by featuring the projects’ tokens in special vaults that offer high APYs for partner tokens. These vaults allow the project partner to gain exposure through Beefy’s Cowmoonity, and they allow stakers to earn additional yields through promotional coins.
The Beefy token ($BIFI) is an XERC-20 smart contract with two key use cases:
- Project Governance - $BIFI holders can vote in the Beefy Snapshot Space on all of our governance matters, at a rate of 1 vote per token (including fractional amounts);
- Stakeholder Incentivization - $BIFI holders can incentivize the participation by stakeholders in the project and protocol with governance incentives paid through Beefy’s Incentive Programmes.
Rewards are auto compounded equally based on the quantity of $BIFI tokens a provider issued into the pool. The rewards are automatically swapped into $BIFI and redeposited. It results in a higher APY of incentives.
The amount of $mooBIFI tokens deposited reflects the investor’s share of the $BIFI in the vault. As an example, 1 $mooBIFI equates to more than 1 $BIFI token.
$rBIFI is the BIFI Pool’s token. The BIFI Pool gives rewards out to token holders in $ETH tokens. Revenue from all vaults on every chain goes to Ethereum and into the BIFI Pool for rewards distribution.
Rewards spread equally based on the $BIFI tokens amount that were deposited into the pool. Investors manually claim their $ETH rewards. The amount of deposited $rBIFI reflects the amount of deposited $BIFI tokens.
About BIFI Governance
BIFI holders have governance rights and thus, can participate in making such decisions as propose and vote on governance proposals or the creation of new vaults.
BIFI holders who want to submit a proposal must hold a minimum of 1 $BIFI. Submitting a proposal on the platform only requires that the user write a title, description, and a link to the forum where discussions are held. Most of Beefy’s governance proposals request funds, but many also introduce potential features.
BIFI is a BEP-20 token native to BSC, but the vote.beefy.finance platform serves as a proposal creation and voting platform for decisions across multiple chains.
Beefy implemented a custom Snapshot to support voting across multiple chains. Although the rights to create and vote on proposals are reserved for BIFI holders, anyone can contribute to the development of Beefy’s multi chain ecosystem by participating in discussions on the protocol’s Discord or Telegram channels.
BIFI Token Updates
As the largest cross-chain bridges — Multichain failed and that, as a matter of logic, meant the BIFI token joined the sinking Titanic, but it also meant a new page for a native token’s story.
BIFI’s migration (or MOOgration) to Ethereum ends up with:
- accessing to the strongest security available now in Web 3.0;
- moving to a universal governance pool and ensuring a more equitable process for participating in the operations of Beefy’s;
- ensuring that one provider’s failure compromises the BIFI governance token;
- removing any minting or permissions functionality;
- dealing with a contract instance, not the contract’s underlying logic;
- adopting the EIP-2612 permit pattern, which allows for gasless permit approvals. This means that users can approve transactions with the bridge without paying gas.
Although Beefy vaults are audited, this can't promise that a vault is 100% risk free. Among general vault risks are the following:
- Deposited assets have no risk of decreasing in quantity but they can decrease in their cost.
- Security issues matter. The Beefy team continually works on quantifying the security risks of smart contracts and interacts only with those that meet a definite set of requirements. It also guarantees excessive testing to ensure the underlying platform does not contain any 'rug-pull' functions. To get more detailed information on this, take a look at Beefy SAFU Practices.
Beefy “Vaults” are one of the easiest ways to maximize your rewards by compounding yield farm rewards into your deposited asset. Only you monitor your crypto investments having an opportunity to withdraw your funds at any moment, enjoying a true decentralization.
Another Beefy's robust side is that it has its native token, $BIFI, which is quite popular among traders. It’s worth mentioning that its price is not as volatile as some other digital assets, although it still experiences significant price changes from time to time.
To sum it up, as an investor you can:
execute yield farming strategies in a more efficient way.
use any asset as liquidity or for generating a yield;
change one asset as collateral for another;
manage collateral at a safe level to reduce liquidation;
reinvest earned rewards.
Beefy leveraged the yield optimization concept and expanded it across many chains and DeFi protocols. It provides investors with a simple and easy-to-use user interface and grants an opportunity to maximize yield on multiple crypto assets by auto-compounding their gained rewards into the deposited asset.
Beefy could be a great option for those looking to earn compound interest on their crypto investments. The protocol automatically increases the user rewards from multiple liquidity pools, automated market-makers, and other yield-farming options within the DeFi ecosystem.
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Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.