DeFi’s “Yield-Farming” Fever Is Coming to Bitcoin, Here’s How

Decentralized Finance (DeFi) projects Ren Protocol, Synthetix, and Curve, are launching Bitcoin liquidity incentives to rival Ethereum-centric DeFi frameworks, reported Decrypt on June 25.

Yield Farming Frenzy

Yield farming has been the flavor of cryptocurrency since May 2020, ever since Compound and other projects gained prominence. Now, three DeFi projects – Synthetix, Curve, and Ren – are partnering up to launch BTC liquidity incentives using Curve’s “low-slippage” pools.

In terms of technicals, the pool features Ethereum-based BTC tokens – renBTC, wBTC, and sBTC – that together, will allow for “swaps” between the three wrappers. For the uninitiated, the “wrapped” products represent Bitcoin on a native ERC20 token and are touted to be backed 1:1 with real Bitcoin.

The first of such came back in January 2019, after Bitgo, Kyber Network, and Ren (formerly Republic Protocol) revealed the wBTC and inspired several similar projects.

Meanwhile, the renBTC, wBTC, and sBTC trio are backed by 10k SNX and 25k REN worth of weekly incentives. Holders who provide liquidity can stake their LP tokens via Mintr to claim a pro-rata portion of the rewards, as Decrypt noted.

Furthermore, Ren and Synthetic are teamed up to issue REN and SYN rewards, respectively, via Balancer Pool Tokens (BPTs) – which was in the news recently for following a price trajectory similar to Compound’s 300 percent rise. 

The above means liquidity pool tokens earn BAL from Liquidity Mining, with contributors also getting a chance to earn Curve’s soon-to-be-announced governance tokens, the CRV, which takes into account preexisting positions upon launch.

Risk Management

As all the wrappers are pegged 1:1 with BTC, the protocol ensures no untoward losses take place. This, as The Defiant’s Camilla Russo notes, “is a major reason why Synethtix’s sETH/ETH Uniswap liquidity incentives became so popular.”

“When paired with the Ren Bridge for permissionless Bitcoin on-ramps, the ability to put your capital to work in DeFi has never been more attractive,” adds Russo.

Interested investors can access Curve’s sBTC pool and deposit their choice token from the three, i.e. renBTC, WBTC, or sBTC.  After the deposit is processed, one can navigate to Mintr’s LP rewards tab and stake the tokens in the Curvepool sBTC section. 

However, one must be aware of high transaction fees. The position can cost as much as $20 to get into.