DeFi Yield Farming Using wBTC
DeFi Yield Farming Using DeversiFi, CoinList, Wrapped Bitcoin (wBTC), Compound and Curve Finance
Decentralised Finance (DeFi) has reached an inflection point over the past few weeks. Projects like AAVE, Compound and Balancer Labs have been gaining traction and the total locked value (TLV) now stands at $1.64 bn
At the same time efforts to bring Bitcoin to Ethereum have also been gathering speed. Wrapped Bitcoin ($wBTC) has been leading the way, with over 6000 new wBTC having been minted over the past month alone. Wrapped Bitcoin has been around for a while, but has only recently seen a surge in adoption due to CoinList providing a faster minting & burning service as well as MakerDAO allowing wBTC to be used as vault collateral.
Two other ERC20 Bitcoin projects are also starting to gain traction. renBTC has launched along with the Ren mainnet and tBTC is starting to scale up after a rocky start.
Source: Dune Analytics
Yield Farming Using wBTC
For traders holding long term BTC positions, putting their BTC to work in DeFi to earn yield can be a valid strategy to stack sats. Although, rewards are not completely risk free — traders are taking on Ethereum smart contract risk.
For those wishing to make the jump into DeFi this guide shows you how to take your USDt or BTC and turn it into wBTC for yield farming in DeFi
Step 1 — Acquire wBTC
Step one depends on if you are starting with BTC, ETH or USDt.
Starting with ETH or USDt:
Go to https://app.deversifi.com/, connect your Ledger or MetaMask wallet, deposit your ETH or USDt and then sell for wBTC in the super liquid wBTC market
Fees: 0–0.2% depending on your DeversiFI 30 day trading volume history
A collection of handy tutorials for connecting, depositing and trading on DeversiFi are available on the DeversiFi support pages:
https://support.deversifi.com/en/knowledgebase/1-getting-started
Starting with BTC:
Currently there are two ways to convert your BTC to wBTC, a centralised way and a decentralized way.
Centralised Way — Sign up for a CoinList account and complete KYC. Once you are verified, you can wrap BTC in the wallet section of your account, turning it into wBTC:
Fees: 0.25%
Decentralized Way — You can use the newly released WBTC.CAFE platform to swap your BTC into wBTC.
WBTC.CAFE uses the Ren Network to seamlessly swap your BTC to wBTC. It is a newly released product to please use with caution.
Fees: 0.5% plus slippage
Step 2 — Stake your wBTC into Compound or Curve Finance Pools
Now that you have some wBTC in your Ethereum wallet, you are now ready to farm some yield!
You have two options
Option 1 — Compound Finance Lending
Lending your wBTC on Compound will yield two rewards
- Interest payments from protocol users who will borrow your wBTC
- $COMP rewards from the block-by-block $COMP token distribution.
To begin earning interest on your wBTC and $COMP tokens on your wBTC, go to app.compound.finance and lend out your wBTC.
Once you have lent out your wBTC, you can check how much $COMP you are earning by visiting the voting section of the APP
Congratulations, soon you will be an owner of $COMP tokens!
For more information about the $COMP distribution see the COMP section of the Compound website
Option 2 — Curve Finance Pool Staking
Another way to make some returns on your wBTC is by staking your wBTC into the Curve Finance Bitcoin pool.
Don’t be fooled by the retro looking website, Curve Finance is an advanced product that allows traders to swap between assets of the same type. For example, stablecoin-to-stablecoin, or different versions of ERC20 Bitcoin tokens.
To get started, navigate to the https://www.curve.fi/sbtc/deposit page and deposit your wBTC
You will now have Liquidity Pool tokens (LP tokens) in your Ethereum wallet that you then need to stake into the Synthetix Mintr system. Go to https://mintr.synthetix.io/ and navigate to the LP Rewards section (top right hand corner) and stake your LP tokens into the CURVEPOOL sBTC section.
Now just sit back and relax. You are earning the following:
- A share of transaction fees from traders who are using the Curve BTC pool to swap between ERC20 Bitcoin tokens
- CURVE tokens (not yet distributed)
- BAL tokens
- BPS tokens (for staking your LP tokens into Synthetix Mintr)
To unstake your wBTC from Curve Finance, you simply need to use the withdrawal options to withdraw in the ERC20 Bitcoin token of your choice https://www.curve.fi/sbtc/withdraw
Unstaking your wBTC from the Curve Finance pool means that you will no longer be earning the transaction fee or token rewards as mentioned above.
Thank you for reading my tutorial on how to earn yield from your wBTC tokens!
