Yield farmers get by with a little help from DeFi aggregators. Here's how these platforms help make crypto staking even more rewarding.
Updated Jul 8, 2022
Many companies on MoneyMade advertise with us. Opinions are our own, but compensation and in-depth research determine where and how companies may appear.
Crypto
DeFi
Passive Income
Finding the most profitable DeFi opportunities is tough due to how rapidly the space is growing. New protocols are popping up every day and existing protocols are constantly finding new ways to stay competitive. As investors are out there chasing higher rates and lower fees, DeFi platforms want to deliver with more rewards and better staking incentives.
Yield farmers who hopped from protocol to protocol and traveled across blockchains in search of better deals found it easier to simply parse through opportunities using a DeFi yield aggregator. Several platforms are looking to help you maximize your DeFi yield, but each has a slightly different way of doing it. Here's what to look for in a yield aggregator and a few popular ones that may do the trick.
A DeFi yield aggregator or yield optimizer is a platform that helps crypto investors maximize passive income from yield farming. Yield aggregators consolidate staking contracts across different protocols to make it easier to find the best DeFi crypto staking opportunities, thus helping maximize user profits. These platforms also boost DeFi staking yield by auto-compounding rewards, which makes yield aggregators an invaluable resource for maximizing DeFi gains in a yield farming economy.
The main way yield aggregators make a profit is by depositing liquidity from crypto investors into decentralized exchanges (DEX). Crypto deposited into liquidity pools (LP) earns yield from fees paid by traders for utilizing the liquidity, but investors must usually claim these rewards manually and incur a gas fee each time they do so, which eats into profits and lowers their staking APY (annual percentage yield).
Yield aggregators enable investors to automate this process and save on fees by staking their LP tokens in vaults. Vaults are smart contracts that optimize LP staking rewards by automatically claiming them and converting them to yield-bearing assets. This means yield aggregators enhance yield farming rewards with auto-compounding that boosts overall staking APY. Some platforms also leverage yield from other staking mechanisms and lending protocols. This means you may use them to improve leveraged yield farming and other sophisticated strategies that aim to produce the highest yield possible.
| Yearn | Convex | Beefy |
|---|---|---|---|
Ethereum | Yes | Yes | No |
Polygon | No | No | Yes |
Avalanche | No | No | Yes |
Optimism | No | No | No |
Arbitrum | Yes | No | Yes |
Fantom | Yes | No | Yes |
While most yield aggregators function almost identically, the biggest differences between them are the blockchains they support and DeFi protocols they utilize. First, most DeFi yield aggregators support Ethereum, but many are on Polygon as well as other layer-2 networks, so it's important to make sure that the yield optimization platform you use supports the blockchain your assets are on.
Second, each yield aggregator taps into different DeFi protocols to earn yield. These mostly include liquidity pools on DEXs like Balancer, but some yield aggregators also earn yield from crypto lending protocols such as Aave. Another way yield is optimized is by staking DeFi protocol tokens to boost liquidity provider rewards—CRV governance token staking is a good example of this. Each DeFi aggregator employs a different combination of yield optimization tactics which results in varying APY rates for staking the same asset on different platforms.
Yearn Finance is one of the top yield aggregator platforms on Ethereum that's also deployed on Fantom and Arbitrum. This platform formulates an optimized yield strategy for each asset using a combination of liquidity pool staking, crypto lending protocols, and other yield-generating protocols like Ethereum 2.0 staking. This means Yearn Finance is able to get the best possible crypto yield rates for all assets across several DeFi protocols.
Vaults on Yearn Finance are called yVaults and they're very straightforward because each one has a detailed description of which protocols it deposits into and how assets are used to generate yield. This means you'll know exactly what kind of risk you're taking on before staking crypto in a yVault. What makes Yearn Finance great is how it combines protocol staking, liquidity and yield farming pools, and crypto lending to produce the optimal APY rate for staking crypto assets.
Convex Finance is different from other DeFi yield aggregators because it only leverages the Curve Finance DEX. While utilizing only one DeFi protocol may seem restrictive for a yield aggregator, this works well because Convex uses CRV staking to give liquidity providers on its platform access to yield boosts.
4.3
•
Crypto
Since CRV must be staked indefinitely to access yield boosts, Convex Finance makes this more accessible with a liquid staking solution for CRV that helps boost rewards for everyone using the platform while maintaining enough liquidity to enable stakers to exit their positions. This works by splitting the boosted rewards among Convex's CRV stakers—who receive cvxCRV for staking CRV—and liquidity providers who deposit their LP tokens into Convex. All users also earn CVX governance tokens which can also be staked to earn even more cvxCRV.
Convex Finance is expanding beyond the Curve DEX and will soon begin serving the FRAX algorithmic stablecoin ecosystem. Convex already created a liquid staking derivative of the FXS governance token called cvxFXS and plans to enable users to yield farm using Frax Finance LP tokens. Although Ethereum is the only blockchain where Convex has been deployed, it's currently the best platform to optimize yield for long-term staking in Curve liquidity pools.
Yield farmers who are looking to optimize rewards across several DeFi protocols deployed on a handful of blockchains may prefer the Beefy Finance yield aggregator. This bovine-themed platform aggregates liquidity pools from multiple DEXs deployed on popular layer-2s including Avalanche, BNB Chain, Cronos, and a dozen other networks. This platform is great for crypto investors looking to cast a wide net into DeFi to find the most lucrative staking opportunities for all assets, including stablecoins.
3.5
•
Crypto
Beefy Finance optimizes your yield farming strategy by regularly redeeming your liquidity provider rewards and depositing them back into the liquidity pool. In other words, Beefy vaults automatically compound your staking rewards to optimize yield earned across all platforms. The BiFi token is used for platform governance, but can also be staked to earn a share of the revenue generated from vault profits. Beefy is a useful tool for identifying liquidity staking opportunities and quickly capitalizing on them.