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What is Yield Farming?
Yield Farming or Liquidity Mining is a developing mechanism of earning rewards from cryptocurrency capital investments. Yield farming follows the staking concept where funds are held in a crypto wallet to facilitate the transactions in a blockchain network. The digital funds held in the wallet can earn returns through a process of locking them. Liquidity mining funds are held in liquidity pools by liquidity providers (LP). They earn rewards for their investment in that exchange interface.
Yield farming is one of the popular DeFi solutions and allows investors to receive an interest for lending out their tokens. It is mainly used on the Ethereum blockchain.
What is DeFi?
Decentralized Finance (DeFi) is the merger of traditional bank services with decentralized technologies such as blockchain. DeFi can also go under the name Open Finance due to its inclusive format. Importantly, the DeFi community seeks to create alternatives to every financial service currently available. These services include items such as savings and checking accounts, loans, asset trading, insurance, and much more.
What is a Liquidity Provider?
Crypto liquidity providers are financial experts that create complicated algorithms to regulate a coin’s liquidity. This has a huge impact on the success of exchanges. When done right, market-making services done by crypto liquidity providers attract organic users who know that they can instantly buy or sell any token on a given exchange.
What is liquid staking?
Liquid staking is earning staking rewards just by holding onto your tokens without a lock-up and while having full liquidity of your stakedTokens. For example, you can hold stETH and earn staking rewards, while also participating in DeFi.
Where do I get some of your stTokens?
Depending on which stToken, you can refer to our homepage (www.stakehound.com) and choose to either buy it directly through the AMM (such as Sushi or Uniswap) by clicking on the “Buy on Sushi/Uni” button or go through the KYC process with StakeHound (that will take a few days to complete) by clicking on the “Exchange at 1:1 ratio” or “Stake Your (Token)” link below the button.
Will I have to claim stToken rewards manually, or will they be automatically received?
stToken staking rewards will be distributed automatically according to the Token’s reward frequency, ranging from daily to weekly. stTokens placed in liquidity pools will also be earning these rewards. You don’t have to take additional action to receive the rewards.
Why won’t I see additional transactions of stTokens’ staking rewards?
stToken holders will not see transactions of reward distribution as it is done through a rebase mechanism. Rebase refers to having an elastic token supply that adjusts according to specific metrics. In this case, stETH’s total supply updates automatically according to the number of ETH staked through StakeHound. When ETH staking rewards are received, leading to an increase of ETH staked, the total stETH supply is also increased accordingly.
If Adam was holding onto 10 stETH and the total ETH staked saw a 5% increase (due to rewards), Adam will now see 10.5 stETH in his holdings – whether it’s in his wallet or in an AMM liquidity pool.
Is the code audited?
Who are the Custodians?
Cryptocurrency custody solutions are third-party providers of storage and security services for cryptocurrencies. Their services are mainly aimed at institutional investors, such as hedge funds, who hold large amounts of bitcoin or other cryptocurrencies. For StakeHound, we work with Fireblocks and Copper, institutional-grade custodian solutions.
Why should I trust StakeHound?
We’re one of the few, if not the only, fully compliant liquid staking provider. We work closely with institutions and depend on trusted and secure partners that complement us and what we’re doing. We also have a stringent KYC process for anyone going through a 1:1 exchange of tokens to stTokens with us. These processes, at times, might be labourous, but are necessary to safeguard our community’s interest.
What does the process look like from a token holder’s perspective?
From a user’s point of view, using StakeHound consists of 4 simple steps:
- Send some of your PoS tokens to StakeHound
- Receive stTokens tokens (ERC20 or others) from StakeHound.
- Watch your balance increase automatically in holding wallets or pools.
- Trade, leverage, and lend those tokens in the Ethereum DeFi ecosystem instantly.
As a matter of fact, most users can skip steps 1 and 2 and buy stakedTokens directly in decentralized marketplaces such as Sushiswap.
What are some of the main steps to earning staking rewards from stTokens issued by StakeHound?
There are four parts to this which are (1) Onboarding, (2) Issuance, (3) Liquid Staking, and (4) Distribution.
Explain the (1) Onboarding process.
Scenario: A protocol wants to provide more value to their community and token holders, and requested for a DeFi bridge onto the Ethereum ecosystem. In order to build this bridge, we would have to first receive and stake their assets (=Tokens).
Explanation: During the onboarding process, the protocol institution would have to go through a KYC/AML process on our platform (Altcoinomy). These deposited Tokens are directly received by custodian partner Fireblocks, instead of holding onto the Tokens ourselves, which are also staked at the same time.
Example: Protocol XYZ’s staking rewards are at 8% APY and require minimally 100,000 to begin staking. Protocol XYZ’s community is constantly asking for more project updates, partnerships, and use cases for XYZ tokens. Protocol XYZ decides to create a DeFi bridge and stake XYZ tokens with us. Protocol XYZ goes through a KYC/AML process and during the process, deposits 1,000,000 XYZ tokens that are then received by Fireblocks. Staking has begun.
Explain the (2) Issuance process.
Scenario: Now that staking has started, this means that rewards will come in. How do people move around and reclaim their tokens and rewards if that is the case?
Explanation: We wrap Tokens into stTokens at a 1:1 ratio through institutional-grade custody. The stTokens are now minted (generated). Whoever has sent us their Token(s), will receive stToken(s) in return.
Example: Adam, a community member of XYZ, is really excited about the flexibility and value Protocol XYZ’s partnership with StakeHound has provided. He got his KYC approved in 3 days and proceeded to stake 3 XYZ with us. We send him 3 stXYZ in return to his specified token delivery address (for ERC-20 tokens).
Explain the (3) Liquid staking process.
Scenario: Users and/or protocol institutions would have received stTokens by now. They will receive staking rewards but are wondering what more they can do with their stTokens now that they are on Ethereum.
Explanation: stTokens are ERC-20 representations of the service of staking Tokens with us. This means that stToken can also access the DeFi ecosystem which consists of but is not limited to liquidity provision, trading, yield farming, lending and borrowing, and more. Users can make their own decisions on how they would like to best utilize the stToken.
Example: Adam received 3 stXYZ. He uses some stXYZ and ETH to provide liquidity to a ETH-stXYZ pool on SushiSwap where it is listed. He now earns the 8% APY, as well as trading fees for providing liquidity to the pool. In exchange for staking his assets in the liquidity pool, he will have receive tokens that represent his share of the pool. These tokens are usually called LP token, and are specifically called SLP on SushiSwap. Adam receives a few ETH-stXYZ SLPs and further stakes his SLPs. Adam receives $SUSHI rewards for staking his SLPs.
Explain the (4) Distribution process.
Situation: Now that stToken holders are making good use of them, it’s time to receive the rewards.
Explanation: The rewards of stTokens are according to the Token’s staking rewards. These staking rewards are automatically distributed to stToken holding wallets. Even providing liquidty to a pool on an AMM would still qualify one for staking rewards. The distribution frequency of stToken staking rewards are the same as the Token’s.
Example: Adam is already receiving $SUSHI rewards for providing liquidity and staking his SLP on Sushi itself. The bulk of his stXYZ is sitting in the pool, with some in his MetaMask wallet. Protocol XYZ’s rewards are distributed every week on Monday. Adam checks his holding balance and saw an increase in stXYZ on Monday in both his MetaMask wallet and pool share on the AMM. Adam is as happy as a clam and can’t wait to stake more with StakeHound.