The beginner-friendly guide to DeFi within the Tezos ecosystem. Part 1: Single Token Staking
Tezos is home to a growing number of decentralized finance applications. Since the barrier for entry is so low on Tezos, a lot of us are getting introduced to concepts like yield farming and liquidity pools for the first time. It can be a lot to take in, so I hope this is helpful.
Many creators have had tremendous success on the Tezos blockchain via platforms like Hic et Nunc, Kalamint, or Bazaar Market, and DeFi is exactly how we can start generating sustainable value for ourselves rather than just letting the funds be housed in random wallets.
One final reminder, none of this is financial advice. Do not invest any money that you can't afford to lose. Do your own research, due diligence, etc, etc. And remember, there are no stupid questions.
What is DeFi?
DeFi is short for decentralized finance. That means a lot of different things depending on who you ask, but I like to think of it as a rejection of big centralized banks and power structures in favor of decentralized systems. Instead of a central bank, we can all become small parts of the bank and reap rewards in a more equitable fashion. You shouldn't have to be immensely wealthy to have your money work for you, and make you even more money.
How Do You DeFi on Tezos? 🤔
Every platform listed in this graphic is contributing to the DeFi landscape of Tezos, just a little differently. Hera is primarily a betting platform that incorporates different aspects of DeFi and appears to be working on a lending platform of some sort. Bender Labs facilitates a number of token transfers from Ethereum. Spacefarm, Crunchy, and Plenty all have different single token pools, in addition to the usual LP farming.
Finally, Quipuswap is the exchange that holds this all together since it's really the only major exchange for Tezos right now. That should all be changing over the next few weeks. August is going to be another exciting month with Plenty, Spacefarm, and Crunchy all going to be launching their own flavor of DEX. What a time to be alive!
But how exactly can we as individuals participate in decentralized finance? There are a few different ways, but for now we are just looking at single token staking. The next installment will feature liquidity pool farming.
Before we go any further there's a few prerequisites.
- a Tezos wallet; I will only recommend Galleon for desktop, and AirGap for mobile
- some XTZ; I use Coinbase Pro to purchase and then send to my Tezos wallet, but there's plenty of other exchanges that carry it
- know your risk tolerance & be prepared to perform due diligence if you're unsure of something.
Single Token Pools
Single token staking can almost be thought of as something similar to a savings account, except that you can actually get a meaningful interest rate. Generally speaking, there's going to be fewer places to do single token staking compared to liquidity pool farming. The rewards for participation are going to be lower most of the time when compared to liquidity pool farming, but we'll have to get into that on another day.
There are several options for doing single token staking right now. Here's a rudimentary graphic that breaks down some of the more "go-to" options. Learn how to preform due diligence and research, but I would feel OK about any of participating in any of these pools. Of these listed examples, I currently participate in the PLENTY -> PLENTY single token pool, as well as some smaller pools available over on Crunchy. Familiarize yourself with the different platforms though!
This will likely change depending on platform and services, but generally speaking the fees are pretty nominal. The biggest fees actually come from PlentyDeFi.com, then Spacefarm, and Crunchy would be cheapest in terms of transactions fees.
PlentyDeFi: their fees are applied upon withdraw of the staked amount. It starts at 25% if you were to pull out your stake immeaditely after putting it into the pool, but after about 9 days it's down to 4%, which is the lowest it can go currently.
- 3 days or less: 25% of withdrawal amount
- 3-6 days: 12.5% of withdrawal amount
- 6-9 days: 10% of withdrawal amount
- 9+ days: 4% of withdrawal amount
Spacefarm: this platform charges their fees on the rewards harvested. Out of the 4 single token pools they offer, 3 of them have fees. The timer starts as soon as you make your very first stake into the pool. Once it's been 30 days than you're not charged any fees (off the rewards, your initial amount put in is not subject to any fees). But it breaks down like this.
- 3 days or less: 4% of rewards
- 3-14 days: 2% of rewards
- 14-30 days: 1% of rewards
- 30+ days: 0% of rewards
Crunchy: I don't have actually a lot to say about Crunchy at the moment. I would encourage you (at first, at least) to stick to the single token pools that have a large amount of liquidity (which you can get an idea of by looking at the Total Value Locked) and are using/rewarding tokens that have been around for a while. If in doubt, just ask someone! The single token pools I'd be interested in over at Crunchy right now would be:
- crDAO -> KUSD: you can farm a psuedo-stablecoin with crDAO which is really neat.
- KALAM -> KALAM: stake your Kalamint tokens, get more Kalamint tokens! It's beautiful and simple.
- FARM -> AVO/WHEAT/RICE/CORN/etc: I'm not sure what the use case is for all of these food tokens, but I really have faith in the team behind the project and believe that they're gonna be doing cool things. Getting plugged into that ecosystem seems like a good use of time.
Okay so you've digested this information and now you're ready go out and see what's available. One of these three websites would be where I would start if looking to see what's all out there.
This post is going to have to be updated regularly, so give me a shout if you have any suggestions, comments, feedback, or mistakes to point out. We're all stronger together!
The next installment on the DeFi primer will be concerning liquidity pools, so if you have any suggestions or bits of information you'd like to contribute/share please feel free to do so! Until then, I can be found on Twitter.
There's more to DeFi than just staking and farming, but it's where most people start with it. New tools and platforms are coming out almost every day it seems. For example, youves is something of a hybrid platform that allows you to to put down your tez as collateral, which will earn you rewards, but they also have an option to borrow against your collateral so you can actually start leveraging yourself, which is how the best stories start off.
The next installment of the decentralized finance primer will be concerning liquidity pools. If there any suggestions, bits of information you'd like to share, or other concerns, please feel free to reach out.
Until then, I can be found on Twitter. Thank you for checking this out.I leave you with one of my favorite NFT pickups of the last week. This piece is called "RAHAYU" and it was done by enggaarga. There's still copies left for only 2 tez! Enjoy!