Best Yield Opportunities in DeFi

DeFi Summer 2.0 is upon us.

Since November 2023, the TVL across all chains has increased by over 2x.

Not only that, but a lot of innovative DeFi primitives that enable earning some crazy yields have recently gone live.

If you hold a significant amount of crypto, why not put it to work?

Today I’ll cover some of my favorite yield opportunities that make it possible to earn some very high yields on blue-chip assets.

Let’s dive in 👇

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Stablecoin Yield Farms

Ethena (on Ethereum L1) - 30% APY or Airdrop

One of my favorite places to earn yield on stablecoins that I also mentioned before is Ethena.

Ethena is a synthetic dollar protocol built on Ethereum.

Its stablecoin, USDe, has a unique design:

USDe is backed by staked ETH collateral and ETH short perpetual positions.

If someone deposits $1000 ETH on Ethena for example, he will get $1000 USDe in return.

Under the hood, Ethena will stake a part of that ETH and use the other part to open an ETH short position in order to achieve a delta-neutral position.

In this way, USDe not only maintains its $1 peg, but also generates yield from 2 different revenue sources:

• ETH staking yield
• Funding rates (from its short perpetual positions)

Funding rates are periodical cash flows exchanged between long- and short-position holders.

Given that much more people are currently bullish on ETH and long it instead of shorting, Ethena is earning some very high rewards from funding rates.

2 ways to earn a yield on your stablecoins with Ethena:

• buy & stake USDe in exchange for sUSDe on the platform

USDe stakers get all the revenue generated by Ethena. At this moment, USDe stakers earn 30% APY on stables.

• Buy USDe and lock it on the platform for 7 days

By doing that, you’ll earn Ethena shards, qualifying you for Ethena’s future airdrop.

For every $1 worth of USDe locked, you get 10x shards per day. 1M shards are worth $750 on points markets like Whales Market, which is quite a lot.

Ethena airdrop is expected to be announced in April.

Personally, I think that it’s way better to buy & lock USDe in order to earn shards than to stake USDe for 30% APY.

Drift Protocol (on Solana) - 57% APY + Airdrop

This yield opportunity is a bit riskier, but the potential rewards are also high.

Drift is the most popular perpetual DEX on Solana. Its points program was launched earlier this year and will conclude in the coming weeks.

The easiest way to farm Drift airdrop is to go to Drift → Earn → Market-Making Vaults and provide liquidity to one of the 2 automated market-maker vaults available.

By doing this, not only you’ll passively earn a high yield on your stables (currently from 33% to 57% APY depending on the vault), but also earn Drift points at the same time.

However, it’s worth keeping in mind that using Drift vaults isn’t risk-free. Very large price movements can cause these vaults to lose money.

But historically, these vaults always had a great performance over a longer period of time.

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Elixir (on Ethereum L1, Arbitrum & Sui) - 20-60% APY + Airdrop

Elixir is a modular network built to power orderbook liquidity.

Elixir allows retail investors to provide liquidity for market-making on decentralized orderbook exchanges, enabling anyone to become a market maker.

Two weeks ago, the protocol launched its points program, which will conclude in August.

Given that Elixir has raised funds at a whooping $800M valuation, I have high expectations for its airdrop.

How to farm its airdrop & earn yield at the same time:

• go to Elixir (you can use this link for a 10% points boost)
• connect your wallet and click on ‘mint ELXETH’
• you can supply here at least $100 ETH for a 50% points boost (however, this is optional)
• after that, click on “Or, supply USDC to native integrations”
• Scroll through the pairs listed on this page and click ‘supply’ to provide stablecoins as liquidity to one of them for market-making

The APR for most pairs is between 20-60%. (excluding the future Elixir airdrop rewards)

One thing worth taking into consideration is that Elixir liquidity providers are affected by impermanent loss in the same way as in Uniswap V2.

Eventually, if you want to not be impacted by Impermanent Loss, you can provide liquidity to an Elixir pair that is composed of 2 stablecoins.

Elixir has both an innovative product and strong VC backing, so its future airdrop in August will likely be a successful one.

ETH Yield Farms

Pendle (on Ethereum & Arbitrum) - up to 70% variable APY + Airdrops

Due to the huge hype around Eigenlayer and the new points meta, Pendle, the largest yield trading protocol, is providing some insane ETH yields right now.

2 things that you can do on Pendle with your ETH:

Deposit your ETH in exchange for a variable yield + airdrop points

• Go to an Eigenlayer liquid restaking protocol (Kelp DAO, Renzo, or EtherFi for example)
• Restake your ETH there in exchange for rsETH, ezETH, or eETH
• After that, go to Pendle
• click on ‘Points Trading’
• select the pool for the protocol you used for restaking your ETH
• click on ‘provide liquidity’ and make sure ‘Zero Impact Mode’ is on
• deposit your assets

This is what I’m personally doing with a part of my ETH holdings.

The yield for providing liquidity is currently insanely attractive.

Some pools are currently offering up to 70% (variable) APY for providing liquidity, and this is on top of the restaking airdrop points that you continue to earn.

The 2nd strategy with Pendle is the following:

Deposit your ETH in exchange for a fixed yield (up to 60% APY)

• Go to a liquid restaking protocol (Kelp DAO, Renzo, or EtherFi for example)
• Restake your ETH there in exchange for rsETH, ezETH, or eETH
• After that, go to Pendle
• look under ‘Earn Fixed Yield’, and select the pool for the protocol you used for restaking your ETH
• Click on it, select a maturity date, and deposit your assets

Pendle Earn main page

In this way, you’ll forego your restaking airdrop points in exchange for earning a high fixed yield on your ETH holdings.

The fixed yield is insanely good, but personally, I still prefer to provide liquidity in return for a variable yield + restaking airdrop points.

Eigenlayer + Swell + Eigenpie (on Ethereum L1) - ETH staking yield + 3 Airdrops + Eigenpie IDO allocation

Swell is a liquid staking & restaking protocol, while Eigenpie is a liquid restaking protocol. What’s interesting is that with Eigenpie, you can farm both Eigenpie & Swell airdrop with the same capital at the same time.

On top of an airdrop for its early adopters, Eigenpie users will also get a small allocation in the $EGP token IDO at $3M FDV in the future.

Here’s the airdrop strategy:

• stake ETH on Swell in exchange for swETH (not rswETH)
• go to Eigenpie and deposit swETH to Swell Staked Ether vault

And that’s all.

If you want to farm multiple airdrops from restaking protocols at once, I think that this is a good way to do it.

After you complete the steps above, you’ll instantly start earning Swell & Eigenpie points. Once Eigenlayer deposits open, you’ll begin getting Eigenlayer points too.

This is because Eigenpie will automatically deposit your capital on Eigenlayer only after the Eigenlayer deposits open again.

SOL Yield Farms

Kamino Finance (on Solana) - ~20% APY + Airdrop

For SOL, there are some interesting yield opportunities too.

Those are not as good as the ones for ETH, but you can still earn 2-digit APY rewards by using certain protocols.

Kamino is one of the most popular Solana money markets.

To earn 20% APY on your SOL holdings, here’s what you have to do:

• go to Kamino
• click on ‘Multiply’
• select one of the 3 yield loops available on that page
• deposit SOL (I recommend using a 3-3.5x multiplier)

Under the hood, Jito will sell your SOL for a SOL liquid staking token, use it as collateral to borrow SOL, and repeat this process a few times.

So you’ll essentially use leverage to earn 20% APY.

Yet the risk of liquidation is low if you don’t use a big multiplier, as you’ll get liquidated only if an SOL liquid staking token loses its peg.

By using Kamino Multiplier, you’ll also earn Kamino Points, which will qualify you for the Kamino airdrop, which will happen in April.

Kamino Finance + Drift (on Solana) - 20-25% APY + 2 airdrops

This strategy involves borrowing stablecoins on Kamino & putting them to work on Drift, the perpetual DEX that I covered earlier in this article.

• deposit SOL on Kamino
• borrow USDC, USDT, or other stablecoin against it (I recommend maintaining a loan-to-value ratio under 40% to not get liquidated)

• if you borrowed other stablecoin than USDC, swap it to USDC on Jupiter
• go to Drift → Earn → Market-Making Vaults
• deposit funds in the Supercharger vault (to earn 57% APY)

In this way, you’ll be able to earn Kamino points, Drift points, and 25% APY rewards. (most of the yield being generated by Drift’s vaults)

And that’s all for today.

As a final piece of advice, I recommend diversifying your portfolio across several protocols to make sure you don’t get wrecked if one of them is exploited.

Personally, I try to avoid depositing more than 5-10% of my crypto holdings in a single protocol. (except for Eigenlayer)

Yield farming can be highly profitable, but it’s crucial to manage your risk.

I hope you found this article helpful!

Until next time,

The DeFi Investor

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