DAO Treasury’s First Activity
As mentioned in our opening medium article, our DAO’s goal is to create value by collectively deciding on how to invest our funds. As our treasury grew, so did our need to do something with it (although to be fair, sitting in Solana the past few weeks hasn’t been too bad).
Was leaving it in Solana the best use of funds? Or could we do something relatively passive with it while we waited for the rest of the Rocks to auction off? That’s when we decided to do some farming on Saber — virtually no risk, but able to help us yield more than just holding Solana.
If you’re like me (Pilot Rock holder — not speaking for the other more tech competent people in the group), and have no idea what the heck farming is all about, it’s basically providing liquidity by allocating your assets to a pool — and while you help provide liquidity, you get rewarded.
The thing with farming though is, that you can actually do a lot of creative things with it to gain a higher APY — depending on what is giving you the highest reward.
Our strategy was 3-fold:
- One: Stake Solana in the mSOL-SOL liquidity pool
(which as a side note was also generating a nice 1512%)
- Two: Deposit mSOL-SOL LP to SUNNY/SBR (basically the liquidity pool tokens you get, you use to farm elsewhere — in this case, we chose the SUNNY/SBR pairing). This means we receive SUNNY tokens and SBR as a reward for providing liquidity.
We are then able to claim the rewards and trade SUNNY/SBR back to USDC on any dex — such as Ninja or Serum
- Three: We use the USDC to stake into the UST-USDC pool, and repeat the process to earn more SUNNY/SBR.
Phew! So if you’re still following, we essentially were able to make an extra $100 a day with our farming methods with 84 sol (at approximately 188 usd on the 9/9/2021) — which is around 130% returns if my math is correct. And that doesn’t even include the APY from holding the LPs.
We mentioned before there are virtually no risks to this, but there are two main risks to farming these protocols:
- Risk of your wallet getting hacked: Either your own error (clicking bad link), or the protocol itself getting hacked and bad code being inserted.
- Risk of protocol’s smart contract being exploited: Therefore all the funds, including yours getting drained.
Although these are relatively low risk, the best way to mitigate this is to spread your farming across multiple yield farming protocols and across multiple wallets — ie have a separate wallet (like with separate private keys) for each farm. Therefore, you limit your downside to one protocol, as it would be highly unlikely for multiple protocols to be exploited.
Once a week, it is also worthwhile to rotate and compound your yield across your accounts. If you have some pairs that have “Impermanent Loss”, there is some risk to under-performing vs holding and the risk of the pool getting rugged.
The other thing to consider is, if you’re holding a LP that is going up a lot, you need to weigh up whether the rewards will out perform holding an asset that is going up. For example, if you are holding NINJA/USD or NINJA/SOL, the NINJA might dry up from the pool as people purchase more of those tokens. In this instance, you would want to ensure that the rewards or emissions outside of the pool will highly reward you in that specific asset.
Anyway, it’s a great way to experiment with some Solana farming if you want to give it a try!
If you want to follow more of our adventures, please follow us on Twitter and Medium!
