Unleashing stETH with APWine
Earn fixed interest on your underlying wETH, speculate on APY evolution or provide liquidity to APWine’s AMM to earn on the Yield Tokenisation trend.
APWine offers new possibilities to stETH/wETH holders. By introducing a derivative layer for DeFi’s yield, they can now unleash the following opportunities:
- Hedging from APR volatility — for those who enjoy fixed income streams
- Future yield in advance — why wait months when you can get it today
- Speculation on APR evolution — forget trading on asset’s $ price fluctuations; % speculation is now a thing
- Earning via Liquidity Provision — earn swap fees & APW rewards as traders speculate.
These are the pillar features of APWine as of today. In this guide, we’ll discuss each point in detail while explaining the benefits & risks involved.
Grab yourself a cup of coffee, and let’s get started ☕️
🔒 Fix APY on wETH — Hedge from volatility
With Ethereum’s switch to PoS on the horizon, Lido sees users piling up to stake their $ETH to earn staking rewards. As the official Lido graph shows, growing deposits suppress APR over time.
If you’re one of the stakers, chances are you’ll see APR continuing its downtrend, resulting in lower yields from staking rewards.
Until recently, yield farmers could do nothing to hedge from APY volatility.
Being at the mercy of the market doesn’t sound fun. APR charts often remind of a rollercoaster track — but staking doesn’t have to be that way.
On the left side, we see a typical graph for APRs. Just like with trading, there are better and worse days.
The solution?
APWine’s Fixed Rates, where it’s possible to fix interest rates for a specific period and hedge from APR volatility.
Open Fixed Rates (APWine APP) and find wETH on the list.
At the moment of writing this, there’s a decent inflow of liquidity for this asset at APWine, offering a staggering opportunity to enjoy a ~238% APR on wETH.
After opening, you’ll be presented with a simple tool to use the underlying wETH to lock in a high APR. The current period allows us to fix interest rates until Jun 21, 2022.
Here’s how to do it step-by-step:
- FIXED APR UP TO — Note it says ‘up to’, as your rate depends on the amount of wETH you put in. Rule of the thumb: the bigger the deposit, the lower the %. It’s dependable on the amount of liquidity in the APWine AMM.
- Jun 21 2022 — date marking the end of the current, 3-month period. Once it ends, you’ll be able to fix APR again for three months on different terms.
- wETH — depositing it into APWine results in a purchase of Principal Tokens. In the estimate above, fixing 5 wETH today will result in a purchase of 5.23 Principal Tokens (PTs), which you’ll be able to redeem for 5.23 wETH on Jun 21, 2022.
- The routing part simply displays the route APWine AMM takes to make that purchase. There’s nothing for you to click on here.
You’ll first need to Approve wETH, then the purchase of PTs on APwine, before performing the actual purchase with your wETH.
Once all transactions are confirmed, your newly obtained PT tokens will be visible in your Portfolio.
🔮 Obtain Future Yield In Advance (even today)
Currently, APWine allows you can obtain your future (up to 3month) yield today, without having to wait for it to crystalize.
Sounds exciting?
Before we continue, a short recap on APWine’s yield primitives — Principal Token & Future Yield Token.
When you deposit interest-bearing assets like stETH (or aDAI/cUSDC) to APWine, you’ll mint 2 primitives where one entitles you to the underlying deposit (PT) and the other entitles you to its accrued yield (FYT).
Read here a longer explanation of each.
Head over to the Home section where you can tokenize your stETH into PT & FYT, or hit this direct link to open the window below:
What we’re about to do here is to take 5 stETH and mint corresponding 4.95 PTs and 4.95 FYTs.
You may ask, why not an equal amount of 5 PTs & 5 FYTs?
In our scenario, approx. 0.05% of 5 stETH is used to fill the FYT, which represents 0.05 stETH, so they are all fungible.
FYT contains nearly all the yield generated over the last 3 months (again, in this case, as we approach the end of the 3-month period), so it takes a part of the stETH you deposit inside the FYT as well as the PT.
After approving stETH & confirming the deposit, your 5 stETH has been effectively locked in the protocol and you’ll receive the corresponding PT & FYS to your wallet.
Note you can unwind your PT & FYT to withdraw your initial stETH deposit anytime.
Let’s recap again what just happened:
APWine separated principal & future yield from interest-bearing stETH. Your future yield has been derived from your interest-bearing token at a current rate offered by the APWine market rates.
From here, you can not obtain your future yield today:
Alternatively, you can do the following:
- Keep FYT to remain exposed to APR volatility (speculation, explained in the next chapter)
- Provide liquidity with your PT & FYT to earn swap fees (APWine AMM overview here, explained in the next chapter)
- Sell FYT to PT to maximize the exposure to fixed interest rates — note you can do it easier & cheaper via the Fixed Rates page (as explained earlier)
- Hold onto your PTs and redeem for underlying wETH in a 1:1 ratio at the end of the period
stETH APR Speculation 📈 📉
Interest rate derivatives are the biggest part of all derivatives in traditional finance, and they employ traders with a new layer to speculate on and make money.
In the top part of the above graphics, we can see a traditional scenario most traders are familiar with; asset price speculation.
With APWine, DeFi traders can now get exposure to APR volatility via Future Yield Tokens.
Buying & selling Future Yield Tokens is no different from flipping the stETH token. This time, you’re simply speculating on the change of the %, not the $ value.
APWine has its own AMM, which most DeFi traders can be familiar with from Uniswap/Balancer. It’s there you can buy FYT directly from the market, without the need of manually tokenising yield off your stETH.
🍇 Provide Liquidity to APWine’s AMM
Earning fees from trades happening inside APWine’s AMM is another way for users to capitalize on the underlying assets and the overall yield tokenization trend thanks to $APW rewards to liquidity providers.
If you’re unfamiliar with liquidity provision, look at this guide to know what you’re getting yourself into.
There are two pools for each interest-bearing token integrated into APWine;
#1 Principal Token / Underlying
#2 Principal Token / Future Yield Token
💡 The Principal Token/Underlying pool reduces impermanent loss up to 100% as the price of the PT starts at a discount and progressively converges to the price of one underlying.
The PT/FYT pool is a classical Balancer V1-like pool with constant 50/50 weights. The ratio between the two assets should follow the ratio between the yield generated and the underlying assets. This pool can expose LPs to impermanent loss.
In addition to swap fees, liquidity providers on APWine are entitled to APW rewards that originate from its ongoing emissions.
The amount of APW tokens pointed at Lido stETH pools is dictated by Gauges. It’s a mechanism that allows community members to dictate the amount of APW tokens going to specific pools for a particular period, currently set at 7 days.
This mechanism, without a doubt, works as designed even in severe market conditions, as liquidity providers are more likely to show up with their tokens to earn higher APW rewards.
Lastly, unlike most DeFi protocols, as a liquidity provider on APWine, you don’t need to stake your LP token to be entitled to APW rewards. Read more about the improved mechanics behind liquidity provision at APWine here.
We hope you enjoyed the read and learned something new.
Ready to get started? Head to our dapp app.apwine.fi and become our community members by using one of the links below.
Explore APWine
APWine pioneers the evolution of yield farming, allowing users to tokenize unrealized yield. Speculate on the yield generated by DeFi protocols. Hedge risk on your passive revenue by converting it into futures. Capitalize on this growing trend by providing liquidity without worrying about impermanent loss.
