Proof That Farming BTCB On Beaver Results In 11.4% More Profits

This article comes at a strategic time. A recent report by Bancor illustrates that more than 50% of liquidity providers on Uniswap are actually losing money due to the infamous culprit — Impermanent Loss. According to the report, almost $199 million was generated on fees within Uniswap’s V3 liquidity pools from $108 billion worth of trading volume. At the same time, $260 million was lost in impermanent loss from the same pools!

Much like Uniswap is for Ethereum, PancakeSwap is the largest DEX on BSC, the home network of Beaver Finance. Reading about the report mentioned above — doesn’t it make you think?

• How much am I losing due to impermanent loss if I provide liquidity directly on PancakeSwap?
• How much will I save if I stake on Beaver Finance and let the protocol automatically do its magic and provide liquidity on PancakeSwap thanks to the dynamic asset allocation engine and impermanent loss hedger?

We have the answers to your question right below, follow along!

Scenario 1 — Providing liquidity directly on PancakeSwap

For illustration purposes, let’s assume,

User A is supplying 1 BTCB as liquidity on PancakeSwap DEX to harvest CAKE reward

• On PancakeSwap, a user must stake two tokens to get LP tokens that they can then stake to earn rewards.
• Now in order to proceed, User A needs to have roughly equal value of both tokens in the pair to yield farm.
• Meaning, user A will manually, Swap 1 BTCB into 0.5 BTCB and 20920 BUSD to receive BTCB-BUSD LP tokens(the current price of BTC is 41480 BUSC when this article is written).
• Then, they will have to come back to the PancakeSwap Farms page to stake the BTCB-BUSD LP tokens to start harvesting rewards.

Scenario 2 — Providing liquidity Beaver Finance. Sit back and relax!

For illustration purposes, let’s assume,

User B is supplying 1 BTCB on Beaver Finance to harvest CAKE rewards.

• So User B hops on to the ‘Farm’ Section on Beaver Finance
• Supplies 1 BTCB in the BTCB single currency LP pool

And that’s it. Now User B sits back and relaxes as Beaver does the magic:

After User B deposits 1 BTCB on Beaver, the dynamic asset allocation engine automatically pairs the BTCB with an equal amount of BUSD, i.e., 41840 BUSD.

Then the Beaver automatically stakes the 1 BTCB/41840 BUSD LP pair on PancakeSwap.

Scenario 3 — Let’s assume that the price of BTCB appreciates by 30% in 6 months

Since the current price of BTCB is $41,840 (at the time of writing this article)

After a 30% appreciation on BTCB:

■ For User A:

• BTCB appreciates to: $27,196, and the total value of the LP pair will become $48,116
• User A will profit only on 0.5 worth of BTCB because they initially swapped their 1 BTCB into an equal value of BUSD to farm on PancakeSwap.
• The price fluctuation will result in an impermanent loss of 0.85% (at the time of writing this article, the IL on PancakeSwap is 0.85%).
• This means user A loses (Impermanent loss = total staked amount *0.85%, $41,840*0.85%) $355.64 due to impermanent loss.
• The current APY on PancakeSwap is = 13.4%
• Total profit according to 13.4% APY for a period of 6 months (182 days) = $2803.28

■ User B’s BTCB appreciates to: $54,392

• User B will be able to enjoy price appreciation on the whole 1 BTCB since instead of splitting their BTCB into half, Beaver matched with an equal amount of BUSD from within the LP pool.
• User B will remain free of any worries since Beaver’s impermanent loss hedger will protect user B’s BTCB from impermanent loss even if there is a price fluctuation of +30%.
• Hedging Cover to be paid (Hedging Cover not fixed) = ~2% of the total deposit) = $836.8
• The current APY on PancakeSwap is = 13.4%
• Total profit according to 13.4% APY for a period of 6 months (182 days) = $2803.28

At the end of 6 months:

• User A is able to get:

Initial deposit — impermanent loss + Farm rewards on PancakeSwap

= $48,116 — $355.64 + $2803.28

= $50,563.64

• User B is able to get:

Initial deposit + Farm rewards — Hedging Cover

= $54,392 + $2803.28 — $836.8

= $56,358.48

User B, who farms on Beaver Finance, is able to get $5,794.84 more than User A, who farms on PancakeSwap.

To that we say, the numbers speak louder!