How to Farm Stablecoins

TL;DR - this article is very high-level and provided an overview for the source of APY of different kinds of DeFi product including DEX, yield aggregator and treasury management with a few examples on Arbitrum. Highlights including:- If a protocol can’t easily define where the yield is coming from, it’s a red flag. How a protocol can generate yield... See more

For example, if you hold Ether you can stake it to help secure the network once Proof of Stake launches. In return for Staking your ETH, you get paid in more ETH, at a rate of about 5%.

The total market cap of all stablecoins is close to $200B. This represents around 10% of the entire crypto industry. They have quickly become a critically important piece of most DeFi products. There are several ways to create a dollar-pegged token, and each strategy comes with some tradeoffs.

Algorithmic stablecoins paying eye-watering yields had all the classic red flags. TerraUSD offered 20% returns on a coin pegged to the dollar (and therefore optically low risk), via protocols like Anchor or startups like Stablegains. The protocols ostensibly created revenue to pay this yield via lending out the funds to eager borrowers. However, th... See more