May 28th 2021
An updated version of this article can be found here. This is week 6 in a series on growing $1,000 through yield farming. You can find the archive on Pinotio.com .
Summary:
I’ve moved all of my yield farming from Binance Smart Chain to Celo.
Yields are higher on Celo, and I also better understand the protocol than Binance.
I’m farming with 50% stables and 50% alts.
Specifically I’m farming 50% UBE-CELO and 50% mcEUR-mcUSD.
Caveat: I see a high chance that I will lose all of this money. If you plan to do yield farming, I suggest you plan on losing all of your money too.
Why Leave Binance?
I’ve been yield farming on Binance for the last five weeks and am down 27% since the start. My main takeaway from yield farming is that the underlying tokens are volatile, so it matters a lot that I invest in high quality tokens. This means investing in tokens I understand over randomly selecting pools with the highest yields.
Binance Smart Chain has low transaction fees, which is good for yield farming. However, the mission of Binance Smart Chain is less clear. The chain is somewhat centralised, making it cheap for transactions, easy to build on, but unclear how – in the long term – the chain will provide services that are distinguished from traditional finance.
Perhaps more importantly, I haven’t spent a lot of time understanding Binance Smart Chain or the protocols on the chain. So, if I’m to move towards yield farming tokens I understand, Binance Smart Chain is not a good option for me.
Why Move to Celo?
Celo is a nascent crypto platform focused on delivering financial services to parts of the world with poor access to traditional finance. As protocols go, I would say that Celo (with their Venmo-like Valora app) is one of the most user friendly.
The Celo network is reasonably decentralised – more than Binance but not quite so much as Ethereum – so I see it as having a future in which it can offer services in a way that traditional finance cannot.
Just as there is Uniswap on Ethereum, there is Ubeswap on Celo. This exchange is in its early phase and providing strong incentives for those providing liquidity.
A few other interesting aspects of Celo:
There is a US stablecoin (cUSD) but also a stable Euro (cEUR) and West African Franc (cXOF).
There is a carbon credit token called cMCO2.
User interface design across wallets (Celo Extension Wallet) and ValoraApp is excellent compared to Binance. (Note that Celo is now also MetaMask compatible).
Week 5 Performance and Transition to Celo:
At the end of the fifth week, I’ve closed out all of my Binance Smart Chain positions – liquidating them into BUSD, and then converted them – through USDT – into CELO tokens on binance.com .
Overall, my Binance strategy was down 27% over five weeks.
I’ve taken those funds (€661) and transferred them over to Ubeswap where I have – in parallel – been yield farming over the past five weeks. My overall cost basis (from week zero) – combining the Binance and Celo mini-funds – is €1592. Returns over the five weeks have been:
Binance Smart Chain: -27%.
Celo: +7.5%.
Aggregate: -10%.
Specific Pools on Celo
My strategy now on Celo is 50% stables (providing liquidity to the EUR-USD pool) and 50% alts (providing liquidity to the UBE governance token with the CELO governance token), which provide a higher yield:
Note that these returns may not look like much, but they are APR not APY!!!
With compounding on a daily basis, these pools would provide APY of about 12,000% and 140%, respectively.
Some Risks involved
Price risk – Ube is a highly volatile token. Just over the past two weeks the price has been crushed by over 50%. There is a significant inherent risk therefore of losses through price movement.
Smart contract risk – there is the risk that Ubeswap contracts could be exploited or fail and lock funds.
Stable coin risk – there is the risk that any of the stablecoins (mcUSD or mcEUR) lose their peg. In the case that these coins lose their peg, that would likely be bad news for CELO and UBE prices as well.
Weekly Approach
At the end of each week I’ll sell off the UBE rewards and reinvest them 50-50 into each of the two pools above. At some point, I might consider diversifying into the Celo Moss Carbon Credit pool, to diversify some exposure to UBE and CELO price movements.