Harvest Finance — Farm Dividend Paying Shares
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What is Harvest Finance?
Harvest is a yield aggregator protocol that automates the process of yield farming as well as saving gas fee and time while doing so. Harvest is NOT a clone of YFI though they are in the same market place. Currently, harvest offers the pools shown below.
You can deposit WETH and the protocol will use your WETH to farm CREAM and sell CREAM for WETH thus increasing your underlying deposited asset. I will explain what the APY next to it with the tractor logo means down below.
You can also deposit any of the stable coins in the list and the protocol will use your funds to farm CRV and sell CRV for the underlying asset.
Uniswap pools are a little different. You need to acquire uniswap liquidity provider tokens and stake them on harvest. The protocol will use your LP tokens to farm Uniswap token and sell it to generate profit. You will still be earning the fees generated from uniswap trades.
Let’s get into what the tractor logo. That yield is the ADDITIONAL yield that you get on top of your yield from farming Curve or Uni or CREAM. You will receive that yield in the form of $FARM token. This is a way for Harvest to offer additional incentive for liquidity providers while performing a fair distribution model for those who are helping the platform bootstrap TVL.
What is $FARM tokens?
$FARM is the governance token for the protocol and pretty much shares that pay dividends. What do I mean by that? Just like Uni, Balancer, Yearn Finance, YFV and many other DeFi projects, there is a native governance token that’s distributed in the form of extra yield incentive to liquidity providers. So, you can vote on governance and what happens with the project but that’s the boring part to be honest. The fun part is the concept of Harvest generating income and FARM being a dividend paying share.
FARM Dividend Explained
Harvest takes 30% of the profit that’s being made and uses that to buy Farm from the market and distribute it in the “Farm Profit Sharing Pool” which I will explain at the end of this section. For now, let’s focus on the buying pressure of the buy backs. Currently, Harvest has 360 million dollars in TVL which generates 41 million dollars in profit.
So, the protocol annually makes $41 mil and charges 30% of that for buy backs. That means 1.23 mil annually or 40,000$ buy backs every single day. Keep in mind that this token is only listed on Uniswap and the current profit for CRV farming is pretty much at all time low. Also, at the craze of yield farming, the protocol has had over 500 mil in TVL. So, the earnings currently aren’t the best but it is still more than enough to sustain the price.
The buy backs are shared in discord in real time and you can click on the links to see them on etherscan. The $FARM that’s being purchased from the market are distributed to Profit Sharing Pool.
This is an auto compounding pool and every time there is a buy back and its distributed, your share goes up. So, you don’t have to claim rewards and re-stake to compound your funds. Pretty much everyone in this pool seems to be holding onto their dear farm.
FARM tokenomics
Farm will have a maximum supply of 690,420 tokens (I know, right?). The good news is that there is a cap so there is no infinite supply. Also, the inflation is actually relatively low compared to other yield farming coins. 221,555 coins (32%) of the total supply has been distributed and the rest will be distributed over 4 years.
After about 50 weeks, the inflation will be quite low while the buybacks continue. Also, 77% of the existing Farm tokens are staked in the profit sharing pool.
Bullish Case for $FARM
Farm has currently 25mil market cap. So, the potential for the market cap to grow is there.
Also, buybacks play an important role in FARM. Currently, the APY for curve and other protocol are at all time low. If we assume that APY for stable coin goes up the usual 30% range and Harvest has 500 mil TVL, that would equate to 45mil annual profit or 123,000$ market buy every single day.
Considering such annual profits, one could expect the market cap to match with the annual profit value. That would put FARM at a 150mil market cap which is about 6x from the current price plus the yield you make from farming. This would be a moderate and conservative expectation.
At the height of yield farming we have seen valuations for market cap that would match the TVL in the project. If that craze and valuations comes back when harvest has 500mil TVL, that would put the price at 20x from where it is now.
Security Review
Harvest has had 2 full audits. They have recently implemented 12-hour time lock on strategies. The contract CAN NOT mint extra tokens. The contract can only make adjustments to the downside. Your existing tokens can’t be burned, they can only reduce the future inflation. So, there is no risk of minting new coins. The strategies are implementing Anti Rug mechanism and many more other security features. You can see the update here; https://medium.com/harvest-finance/week-6-update-security-rules-everything-around-me-62a681a3692a
Closing Thoughts
Overall, Harvest is an extremely decent project. It has one of the best communities in the space. People don’t talk about price and most of the conversation is about different farming strategies and ideas on how to make the platform better. We believe that it has a very large upside potential. There only a handful projects in crypto space that has a working, cash generating product. Do not let the Chad scare you away and give you bad first impression, what’s under the hood is actually pretty decent.
If you want to learn more about DeFi and Yield Farming, check out our DeFi and Yield Farming article HERE
Useful Links
Project website: harvest.finance
Return calculator: https://farmingreturn.com
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