rafaviles commented 3 years ago

Automate a DeFi Yield Farming Strategy on Polygon and AAVE

The Bounty

We have created this guided bounty where developers can participate by automating the strategy we detail below. The idea is that developers take the strategy and automate it by building smart contracts that facilitate programmatically yield farming of this strategy.

The context

The yield farming program is a liquidity mining program for MATIC rewards, and it is used to attract deposits into Aave. Depositors can lend out their crypto assets while borrowers who are looking to borrow these assets can do so as well.

Polygon is giving out MATIC rewards so people are incentivized to participate in their network. The supported markets are AAVE, DAI, ETH, MATIC, USDC, USDT, and WBTC.

Resources

How to Deploy a Smart Contract on the Polygon Test Network

This guide will show you how to deploy a smart contract on the Polygon network leveraging Metamask and the IDE Remix. It's useful if you don't have any experience with Polygon or Solidity.

Solidity smart contract IDE and debug tools

A quick list of the development tools that you can leverage. We recommend however the setup described above.

Aave Docs

How to interact with the Lending Pool so you can deposit, borrow, withdraw, and more.
List of deployed contracts

Other Polygon Resources

Bridge tokens from Ethereum mainnet to Polygon using Zapper Bridge or Matic Bridge
Bridge stablecoins from BSC to Polygon using xPollinate
USDC bridging to Polygon using AscenDEX
Yield Farming on Aave on Polygon

What makes a submission complete?

Link to a public Github repository containing the code, team members, presentations, demo, and documentation
Projects cannot be edited after submission.

The Strategy

1. Bridge funds over to Matic

Bridge some Matic to your address (for fees)
Bridge your stablecoins (USDT, USDC, DAI)

2. Deposit funds on Matic via Aave

Stables

Deposit stable coins into the Aave market.
DAI and USDC can be used for collateral.
USDT cannot be collateralized but earns the highest deposit yield (%3.08+%6.99 in this case).

3. Deposit yield

Just by depositing you can earn up to 1.80-3.08% APY in native stable coin (as of June 8th, 2021).
You also earn an additional 1.83-6.99% in Matic rewards.
So your total APR can be around 4-10% just for depositing.
Polygon allocated like 40-50M in rewards for these Aave pools.
Without borrowing, you'll earn these rewards in real-time.

4. Earn by borrowing

Borrow Markets

Borrow Markets as of June 8th, 2021

In borrowing markets, the variable borrow APR is the interest YOU have to pay additional to your loan.
The Matic % underneath is what Aave will pay YOU just to borrow.
for USDT you can earn 7.96% APR in Matic just by borrowing (you have to pay 3.90% APR, however).
Don't forget when you deposit as collateral you also earn.
For USDT you earn 3.08+6.99%=10.07% APR to deposit as explained above.
You pay 3.90% and earn 7.96% APR to borrow, which makes you a 4.06% extra profit.
This for USDT only makes it a total APR of 10.07% for depositing and 4.06% for borrowing.
You're essentially getting paid a lot of Matic tokens to borrow on top of the deposit.

5. Define Borrow Strategy

Let's say you deposit 20k into DAI, 20k into USDC, and 60k into USDT pools.
You have 40k as collateral where you can borrow ~20k USDT.
You are earning interest on 20k DAI, 20k USDC deposits and have 80k USDT (your original 60K which you deposited and the borrowed 20K).
So now you can invest the 20K USDT loan.

6. Deposit Borrowed USDT in CRV for Curve Rewards

curve

You can now deposit the 20k USDT into curve's platform and earn 3.71% in USDT + 17.09% APY in Matic! Yes, over 20%+ APY on your loan from CRV + the borrowing interest you're already earning on AAVE.

7. Compound Rewards

In DeFi you can claim your rewards at any time. So you can periodically claim your Matic rewards in this strategy.
You can either: a) add Matic to the matic pool on AAVE and earn an additional APR on that. b) swap for more stables and repeat the whole thing

Summary

Earn deposit interests on Aave
Earn borrow interests on Aave
Earn deposit interests on Curve
Compound on Aave and Curve

Summary

Winning Criteria

Does the submission contain all steps mentioned in it?
How high is the APY?
How easy is it for a non-technical user to use this?
How automated is the submission? Are there manual steps in-between?
Are there creative additions that generate a higher APY?
Are there any obvious security issues with the contracts?
Optional: Does the submission have a frontend component? How usable is it?

Judges

We have asked members of our community to participate as judges. They will use the criteria described above to rank all submissions. We will announce winners 2 weeks after the submission deadline.

gitcoinbot commented 3 years ago

Issue Status: 1. Open 2. Started 3. Submitted 4. Done

This issue now has a funding of 5000.0 USDC (5000.0 USD @ $1.0/USDC) attached to it.

If you would like to work on this issue you can 'start work' on the Gitcoin Issue Details page.
- Want to chip in? Add your own contribution here.
- Questions? Checkout Gitcoin Help or the Gitcoin's Discord
- $2,735,835.65 more funded OSS Work available on the Gitcoin Issue Explorer

gitcoinbot commented 3 years ago

Issue Status: 1. Open 2. Started 3. Submitted 4. Done

Work has been started.

These users each claimed they can complete the work by 57 minutes from now. Please review their action plans below:

1) sunnyrk has started work.

Will work around it 2) encrobaser has started work.

We will be developing a strategy for automatic compounding of stablecoins with yield bearing strategies on Polygon as advised in the guidelines. 3) ivor222 has started work.

We will be developing a strategy for automatic compounding of stablecoins with yield bearing strategies on Polygon as advised in the guidelines.

Learn more on the Gitcoin Issue Details page.

dxganta commented 3 years ago

The net borrow interests (including MATIC rewards) have become negative for USDC, DAI & USDT in the AAVE Pool as of June 21. Will it still be a good idea to add borrowing to this strategy?

dxganta commented 3 years ago

@rafaviles

rafaviles commented 3 years ago

The net borrow interests (including MATIC rewards) have become negative for USDC, DAI & USDT in the AAVE Pool as of June 21. Will it still be a good idea to add borrowing to this strategy?

Hi @realdiganta - thanks for your question. You're only borrowing USDT which as of now is still positive. Even if it's become slightly negative, the APY you are getting from investing in the USDT loan + the Matic rewards should be higher than that. Feel free to get creative on how to avoid overall negative net APYs.

dxganta commented 3 years ago

Hey @rafaviles is it required to implement a vault contract too for the strategy?

rafaviles commented 3 years ago

Hey @rafaviles is it required to implement a vault contract too for the strategy?

Hi @realdiganta, you don't need to implement a vault. We wanted to focus on the strategy since we know you have limited time. Of course, if time allows optional components like the vault, fronted, etc. are more than welcome.

dxganta commented 3 years ago

Hey @rafaviles is it required to implement a vault contract too for the strategy?

Hi @realdiganta, you don't need to implement a vault. We wanted to focus on the strategy since we know you have limited time. Of course, if time allows optional components like the vault, fronted, etc. are more than welcome.

Thank you

abhishekr700 commented 3 years ago

@rafaviles Do we also need the smart contract to implement bridging assets or just lending/borrow on aave and curve is sufficient.

rafaviles commented 3 years ago

@rafaviles Do we also need the smart contract to implement bridging assets or just lending/borrow on aave and curve is sufficient.

@abhishekr700 The strategy (lending/borrowing) is sufficient for submission. However, the more automation you can build into it the more you’ll differentiate from other submissions.

gitcoinbot commented 3 years ago

Issue Status: 1. Open 2. Started 3. Submitted 4. Done

Work for 10000.0 USDC (10000.00 USD @ $1.0/USDC) has been submitted by:

Learn more on the Gitcoin Issue Details page
Want to chip in? Add your own contribution here.
Questions? Checkout Gitcoin Help or the Gitcoin's Discord
$1,905,571.81 more funded OSS Work available on the Gitcoin Issue Explorer

gitcoinbot commented 3 years ago

Issue Status: 1. Open 2. Started 3. Submitted 4. Done

Work for 10000.0 USDC (10000.00 USD @ $1.0/USDC) has been submitted by:

@rafaviles please take a look at the submitted work:

PR by @ivor222
PR by @realdiganta
PR by @zunamilab
PR by @nuclearhit22

Learn more on the Gitcoin Issue Details page
Want to chip in? Add your own contribution here.
Questions? Checkout Gitcoin Help or the Gitcoin's Discord
$1,993,665.11 more funded OSS Work available on the Gitcoin Issue Explorer

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