Yield Farming Opportunities in the Tezos Ecosystem

by Nikolay Beliavskyi

In the previous article, we wrote about yield farming, how this strategy for increasing crypto-assets became popular, and what risks it carries. If you are new to this topic, we advise you to read this article. Today we will talk about the programs and protocols that allow you to farm in the Tezos ecosystem. 

The capitalization of the DeFi sector in the Tezos ecosystem is about $100 million. So far, almost 20,000 smart contracts have been deployed on the Tezos mainnet, according to Better Cal Dev. However, these numbers are still very small, which indicates that DeFi on Tezos is just beginning to develop.  Keeping in mind the dynamics of the Ethereum network, where approximately $80 billion are already locked in the DeFi sector, we can expect a rapid increase of these numbers in Tezos.

Yield farming is one of the top drivers of capital migration to DeFi. We have listed a few of the main Tezos dApps that enable users to participate in profitable farming below. 

Wrap Protocol

This decentralized protocol allows ERC20 (Ethereum) tokens to be “wrapped” into the FA2 (Tezos) standard. Wrap Protocol works on the following principle: “lock ERC20 tokens on a deposit contract on the Ethereum blockchain; issue the corresponding amount of FA2 tokens on the Tezos blockchain”. To unlock the original asset, you need to burn the FA2 wrapped asset. In this way, value can be transferred between two different networks, and each token is backed by real value.

This project provides an opportunity to participate in yield farming. First, a user puts the wrapped tokens into a liquidity pool on the decentralized exchange and receives LP-tokens in return. By using these LP-tokens in farming programs, the user receives $WRAP as a reward. The native protocol coin can be used in yield farming, sold, or locked on a contract to receive interest on each wrapping and unwrapping of tokens through the protocol.

Farms for $WRAP tokens
Farms for $WRAP tokens

You can read a full review of the Wrap Protocol on our blog.

Crunchy Network

It is a platform for developers and users that offers versatile tools for liquidity management and yield farming. Instead of creating and testing their own contracts, developers can use ready-made contracts for staking, yield farming, and other activities that encourage users to provide liquidity.

For the user, this platform is a convenient aggregator of farming programs, which allows anyone to study the conditions and indicators of various instruments in one place and make investment decisions.

Currently, over $13,260,000 (ꜩ 3,612,000) worth of funds are locked in the farming programs on Crunchy Network, and 16 farms from various DeFi projects are available.

You can read a full review of the Crunchy Network on our blog.

Plenty DeFi

Plenty DeFi is a young, decentralized yield farm protocol and token-to-token DEX in the Tezos ecosystem with over $45 million locked in smart contracts. The project has its own token, which is traded on QuipuSwap and Plenty. Plenty Defi currently offers two yield farming strategies:

  • Liquidity mining for LP-providers
  • Stake PLENTY and earn tokens

In available farming programs, you can use the LP-tokens received to provide liquidity on Quipuswap or Plenty.

Kolibri

The Kolibri stablecoin was launched in January 2021 and is currently one of the most successful projects in the Tezos ecosystem. Kolibri relies on a set of smart contracts and collateral to withstand price fluctuations. Each new deposit creates an oven, or Collateralized Debt Position (CDP), that allows users to deposit, withdraw, borrow, and repay.

The Kolibri Liquidity Pool issues QLkUSD tokens in exchange for deposits of kUSD tokens in the pool. With QLkUSD tokens, you can claim extra kUSD from liquidating ovens. After liquidation, the pool trades the leftover XTZ for kUSD on QuipuSwap and distributes them proportionally among all holders of QLkUSD tokens.

Kolibri also includes several farming programs:

  • The kUSD Quipu LP farm allows you to deposit Quipuswap XTZ/kUSD LP Tokens and farm Kolibri Governance Tokens (kDAO).
  • The kUSD farm allows you to deposit kUSD and farm Kolibri Governance Tokens (kDAO).
  • The QLkUSD farm allows you to deposit Kolibri Liquidity Pool Tokens and farm Kolibri Governance Tokens (kDAO).

You can read a full review of Kolibri on our blog.

Hera

This platform in the Tezos ecosystem integrates a calendar of events for the Tezos community and provides p2p betting, p2p lottery, yield farming, and plans to launch a decentralized AMM protocol.

Users receive the governance tokens hrDAO and HERA in exchange for their participation in yield farming programs by providing liquidity.

Aliens

Aliens is a yield farming platform developed by the DegenTech team. The platform has its own PAUL token, several liquidity mining programs, a referral program, and several sections that are “in development” (including NFT, Vault, and AMM). According to publications on the official channels, the team is planning to launch a “high-tech and user-friendly DEX”. 

The TVL in Aliens’ farms exceeds $750,000, and the annual percentage rate of available programs varies from 560% to 870%.  As a reward for participating in farms, users receive PAUL tokens, which are traded on QuipuSwap.

QuipuSwap

QuipuSwap, developed by the MadFish team, is the largest decentralized exchange in the Tezos ecosystem. The liquidity volume on this DEX has reached $27 million and continues to grow.

QuipuSwap allows users to provide liquidity to pools and receive commissions and LP-tokens, which can then be used in various liquidity farming programs. The native token of the Quipuswap DEX, QUIPU, will be available for liquidity mining in the future. 

You can read a full review of the QuipuSwap DEX on our blog.

How to Participate in Yield Farming

To show an example of yield farming in the Tezos ecosystem, we present an instruction video “Liquidity farming on Tezos with WRAP and QuipuSwap”, which describes step by step the process of providing liquidity to a decentralized exchange as well as how to use LP-tokens in the Wrap Protocol farming program to obtain WRAP tokens.

Perspectives

The dynamics of the use of smart contracts in the Tezos ecosystem are impressive. Over the past months, the frequency of calls to contracts has increased more than six times. TVL across the various Tezos blockchain protocols shows the same dynamic, confirming the start of the “DeFi season” in this ecosystem.

Source: Better Cal Dev

In addition, on August 6, 2021, the Granada update was released to the network, which brought down the block formation time by 50% and significantly reduced gas consumption in smart contracts. This update made the Tezos ecosystem even more interesting and beneficial to DeFi applications, which means their numbers will continue to grow.

Along with this, the number of yield farming programs will also increase, attracting more liquidity and users to Tezos.

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