Total TVL Across All Supported Networks
Generally considered as a low risk investment
Control-free. Hold & Earn.
Average APY you can expect on Notum
Yield aggregation is an integral part of the DeFi investment sector and the yield economy as a whole. This investment strategy allows to combine of various smart contracts and strategies so that the users can get the maximum profit from their investments.
As crypto investment strategies continue to gain attention and popularity in 2023, more people are looking to invest in DeFi crypto yields to maximize potential profits.
In today’s article from Notum, we will answer questions about how yield aggregators function, what the distinctive features of this strategy are, and why it is worth investing in it, as well as pay attention to 2 popular protocols for yield aggregation investments.
Yield aggregators can be described as a set of smart contracts (or DeFi protocols) that combine the user's provided crypto assets and invest them in profitable projects. This process is carried out using programmed, automatically executed strategies.
Now, there are a large number of different yield aggregators that are quite similar to each other. The main differences typically include the smart contracts they use and the blockchains they support. However, before moving on to yield aggregation investments, it’s worth knowing that they all have different rewards and commissions.
Yield aggregation is an investment strategy that combines various strategies and DeFi protocols to bring maximum profit to the user.
The operating principle of this investment strategy does not require active user participation and is therefore attractive to investors around the world. Simply put, the user deposits crypto assets into DeFi vaults to make a profit. The vault’s smart contract, in turn, automatically allocates these assets to various yield farming strategies to maximize returns. In return for providing their assets, users receive a share of the profits generated by the vault.
The vault takes care of all the difficulties associated with yield farming, such as managing gas fees, adjusting strategies, etc.
As already mentioned, to obtain a yield, users deposit (stake or block) their crypto coins. However, how exactly do they make a profit? This is the main task of profitability aggregators - they automate the farming process so that users can get maximum yields from their investments.
The principle of making money from vaults is that yield aggregators combine the deposited funds of various investors, which helps to get rewards using different strategies. With these strategies, investors’ tokens can be moved across different projects to optimize profit as much as possible. In this case, interest is calculated automatically.
The advantage of yield aggregation is receiving passive income through yield aggregators. In this way, users receive profits without having to actively participate in the process.
Thus, after a user deposits their funds into the vault, an automated yield aggregation process gives users a share of the profits generated by the vault.
Yield aggregation rewards depend on many factors, including the asset, the chosen platform, investment strategy, and more.
Yield aggregation is undoubtedly one of the most important parts of the DeFi sector, as it automates the process of generating passive income and thereby attracts more people to crypto investments. This is why investing in return aggregation is a suitable strategy for those who want to earn income without actively participating in the process and make the most of their funds in the DeFi space.
As these platforms use smart contracts to automatically distribute funds across different protocols, they optimize rewards by finding the best available yield in the market. Yield aggregation has a fairly large number of strategies, which also guarantees that you receive maximum profit from your investments.
Thus, by investing in yield aggregation, users receive income without the need to constantly adjust their strategy, since the process is automated.
The operating principle of yield aggregation platforms is to obtain maximum profit, which is achieved due to DeFi protocols, which allow to actively search for the best options for generating income.
Automated passive income
Since many investors are looking to make a profit effortlessly, yield aggregation offers an excellent passive income opportunity. The user does not need to be actively involved, since yield aggregation platforms have automated searches and invest money in the most promising projects.
Since some yield aggregators require liquidity to be provided to DEXs, users can receive additional rewards or tokens that can also be used to generate additional profits.
If a user provides liquidity in DEXs, they may experience impermanent loss due to token price fluctuations.
Smart contract risk
Since yield aggregation platforms use smart contracts to operate, vulnerabilities in these contracts can lead to asset losses.
The DeFi market is quite unstable, so the income from DeFi platforms may depend on market sentiment, its conditions, fluctuations, and other things that can affect the effectiveness of the chosen strategy.
The most popular yield protocols for aggregation in 2023 are Yearn, Harvest, Sommelier, Idle, and Beefy. In today's article from Notum, we'll take a closer look at the Yearn and Beefy protocols, focusing on their distinctive features, revenue strategies, advantages, disadvantages, and profit potential.
Yearn.finance is a decentralized group of products on the Ethereum blockchain that helps users, decentralized autonomous organizations and other protocols earn and optimize profits on their crypto assets.
The platform eliminates the need for middlemen and offers users access to various services directly. Vaults on Yearn.finance allows users to use the platform's self-executing code to obtain the most active investment strategies.
“Users benefit from the lower gas costs and low transaction fees levied by Yearn.finance on each vault-related transaction.” - Cointelegraph
Today we will observe two investment strategies you can use to make profits on Yearn:
Since DAI is a stablecoin, this investment strategy is less risky than others. By depositing DAI to yvDAI vault on Yearn.finance, users on average receive between 9 and 10% APY. The monthly DAI APR is currently 7.09%.
yCRV on the Ethereum blockchain offers users a fairly high yield compared to other strategies on Yearn. While the average APY ranges from 26 to 28%, the weekly APR of yCRV brings users around 21.78%.
yCRV is Yearn Finance's new and improved veCRV wrapper system designed to tokenize Yearn's veCRV position which passes all revenue and benefits along to users. - Yearn.fi
Yearn Finance is a low-medium-risk DeFi service that offers various vaults on five different blockchains, bringing high rewards to the user without active participation in strategy management.
During its relatively short existence, the platform already has a TVL of over $333 million, offers a variety of investment opportunities, and has a strong reputation in the DeFi space.
Beefy describes itself as a decentralized, multichain yield optimizer whose main goal is to allow users to earn compound interest on their crypto assets. The platform is famous for the fact that it allows you to earn fairly high APYs across 18 chains.
The platform's core investment product is vaults, which allow users to stake their crypto assets to receive rewards. Each vault on Beefy has its own investment strategy, which automatically increases the amount of deposited tokens. This happens “by compounding arbitrary yield farm reward tokens back into your initially deposited asset.” – Coinmarketcap.
The advantage of Beefy Finance is that assets deposited in vaults are never locked, which means the user can withdraw crypto at any time.
Let’s have a look at investment options you can consider with Beefy:
This vault on the Polygon network has a 24-hour compounding cycle. The transaction cost required to generate rewards is distributed evenly among the vault’s users, and the average APY varies from 7 to 18%.
This low-complexity strategy offers fairly high APYs in comparison with BIFI on Ethreum network which can vary from 5 to 7%. This vault is aimed at optimally increasing APR.
Multiple blockchains’ support
Since Beefy operates across 18 chains, it allows it to attract a wider network of users and investors.
Potentially high yields
Beefy effectively optimizes deposited funds, which allows to find the most profitable opportunities for users.
Since Beefy distributes deposited crypto assets into different protocols and pools, it reduces the risk of losing funds due to market fluctuations or protocol failure.
Variety of vaults
At the moment, Beefy Optimizer has 552 vaults of different types and even shows the degree of a particular vault’s safety.
Smart contract risk
The main risk of Beefy, as well as other projects working on smart contracts, is that user funds can be stolen due to bugs and vulnerabilities.
Since Beefy works with compound interest and offers a huge number of vaults and chains, it can be quite difficult for a beginner to understand investment strategies and assess the risks.
Decrease in asset value
As Beefy itself states, although the assets placed in vaults will not decrease in quantity, they can still lose value.
Beefy is a convenient, efficient, and secure multichain yield optimizer with a medium risk level that allows users to receive passive crypto rewards and offers fairly high APY. Investing in Beefy Vaults is an opportunity to earn passive income, while the platform automatically searches for the best possible yields, reinvests profits, and maintains a balance of collateral-to-debt ratios.
Cryptocurrency risks assessment, all-time gains insights and profit, and a loss calculator at your fingertips!
Why crypto vaults is medium-risk investment?
Since vaults use programmed, automatically executed strategies, the entire process is quite secure. However, since they operate on smart contracts, there is always the risk of a vulnerability or bug, as well as market fluctuations, which can lead to loss of funds.
What are yield aggregators’ potential returns?
The rewards from yield aggregation will largely depend on the assets provided, the chosen investment strategy and platform. Average APYs range from 5% to 30% or more.
Can yield aggregation be automated?
Yield aggregation is automated, so users can receive high passive rewards without active involvement and moderation of the chosen investment strategy. Vaults automatically find options for getting the best yield, which makes them one of the best investment options.
What are yield aggregator risks?
The main risks of yield aggregators include smart contract vulnerabilities, market fluctuations, decrease in asset value and governance risks.
What are crypto vaults?
Vault is a crypto asset storage option designed for long-term holding of funds with additional security.
What is a yield aggregator?
Yield aggregator is a combination of DeFi protocols that invests user's provided crypto assets in profitable projects through programmed strategies to get the highest reward.
Difference between yield farming and yield aggregators?
While yield farming most often involves locking or staking user funds, yield aggregators automate the farming process to maximize profits.