Today we announce https://t.co/ohiMgjJ1QE, the Wealthfront for DeFi.
— apyfinance (@apyfinance) August 9, 2020
As an automated liquidity aggregator, users can deposit capital into the protocol in exchange for tokenized LP shares called APT (APY Pool Tokens). Similar to how Balancer Pool Tokens (BPT) and Uniswap LP Tokens (UNI) work, APT represents a pro-rata claim on the total amount of capital held in the APY.Finance pool. As interest is earned by the protocol, it’s shared with LP’s who can claim rewards at any time in a non-custodial manner.
Under the hood, APY.Finance sources alpha from leading DeFi protocols like Compound, Uniswap, Synthetix, Curve, and Balancer. To start, APY will feature recursive Compound lending and borrowing to maximize COMP rewards following by Balancer BAL liquidity mining.
The protocol is governed by a native token – APY – which is used to dictate new strategies which are added to the protocol and other parameters like fees and feature integrations. Touting itself as the Weatlhfront for DeFi, APY.finance is joining the growing subsector of automated yield farming at a very opportune time.
“APY.Finance aims to democratize yield farming by making it accessible to the average user and not just the DeFi experts.”
While you would think APY will simply chase the highest yield at any time, the protocol will take adjusted risk into account to help mitigate potential downsides.
“Capital is spread across multiple strategies, depending on each strategy’s risk score. If a strategy has high yield but also a high perceived risk, some capital will be allocated to capture the upside but only a limited amount to reduce the downside.”
While the first iteration of the protocol will feature one global capital pool, future iterations are set to introduce different pools to allow users to participate in whatever strategies best suites their tolerance.
To encourage early adopters, the team will be allocating a large portion of APY tokens to public rewards and liquidity mining. This comes in tandem with an expected IDO set to turn the heads of all DeFi token hunters.
Robo Yield Farming Heats Up
Just when you thought yield farming couldn’t get any better, platforms like APY are here to automated the whole process. This comes in tandem with products like Rari Captial and Akropolis Delphi – two new yield farming aggregators with similar visions for a farm-friendly future.
With rockstar platforms like yEarn also adding new strategies every day, it’s fascinating to consider how returns will change once platforms allow anyone to participate at the click of a button. On one side, the ability to effectively farm by entering and exiting one time is a huge win for small farmers struggling to combat rising gas prices. On the other hand, the degree of alpha any one farmer can earn through specialized knowledge is quickly getting priced out as protocols like APY build products specifically designed to capture and share these opportunities with their users.
If one thing is for sure, the thesis that DeFi will unlock global access to new financial primitives is playing out right before our eyes.
Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.