Beefy Finance is a Multi Chain Yield Optimizer that enables users to get a maximal returns on their assets while removing the cost and hassle of daily harvest.
Have you ever staked your crypto assets on Defi Platforms?
Do you know that this process can be automated?
Do you know what Beefy.Finance is?
If your answer to any of the above questions is ‘No’, then this article is for you. Here we will discuss the most optimized yield aggregator called Beefy Finance. But, before we understand Beefy Finance and other automated Yield Aggregators, let us first understand the concept of Yield Farming and Yield Optimisation.
If you ever wanted to try your hands on DeFi lending/borrowing/farming, this post is going to be your initiation in this world.
The best part, we will be using Binance smart chain rather than Ethereum chain, so your transaction cost would be really low. And, as Binance is one of the highly recommended crypto exchanges here at CoinSutra, you will have a greater chance of exploring this new paradigm of your own.
So without further delay, lets dwell deep into the fundamental of Yield farming, and Yield optimization.
What is Yield Farming and Yield Optimisation?
Yield farming is a process of staking or lending your crypto assets under a smart contract-based liquidity pool in order to generate high returns or rewards in the form of additional cryptocurrency. Here a lender is known as a Liquidity Provider and the fund where the money is lent is known as the Liquidity Pool.
Yield farming protocols incentivize liquidity providers (LP) to stake or lock up their crypto assets in the liquidity pool. These incentives can be a percentage of transaction fees, interest from lenders, or a governance token.
Yield optimization can be defined as using data analysis and optimization techniques to maximize the performance and revenue of Yield farming projects. In Defi, this could be approached by a platform aggregator designed to apply algorithmic strategies to obtain high APYs.
What is Beefy Finance?
Beefy.finance is a yield optimization tool on Binance smart chain, that helps to maximize the return from yield farming. Just to give you a better perspective, Bakerysoup.org is a yield farming platform, and so is Venus.io. You can farm directly using these two platforms, but when you use something like Beefy.finance or its alternative such as autofarm.network, you are basically optimizing and maximizing your yield farming effort automatically. How it is done, we will look into the further section of this guide.
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A little background, one of the first aggregators in this ecosystem is Yearn Finance, which was also a great option for Yield Farming. But, Yearn Finance operates on the Ethereum Network whose transaction cost (Ethereum GAS fees) has skyrocketed in the recent past. As a lucrative alternative, Beefy Finance runs on Binance Smart Chain and with a lower transaction fee. This opens up doors for much more involved strategies that can rebalance frequently and use an increased number of transactions to maximize APY’s (more on APY later).
How a Yield is Optimised with Beefy Finance?
Beefy Finance optimizes yields through a vault system; vaults serve as investment instruments, which implement strategies through smart contracts. These vaults automate the best yield farming opportunities for you.
A vault has the following functions:
Use crypto assets as liquidity,
Provide assets as collateral for others,
Manage collateral to reduce chances of liquidation,
Use assets to generate a yield and compound profits
I know it may be a lot for a newbie to digest, but once you start interacting with these DApps, you would start understanding better.
Why Do you need Beefy Finance?
A person can obviously do yield farming directly with platforms like Venus.io, Backeryswap.org or others, but vaults help you save on gas, maintain healthy collateral to debt ratios, self-optimize for the best possible yields, and automatically reinvest earnings.
With the above functions, vaults allow users to automate their De-Fi farming experience completely and optimize the returns in the best possible way.
What are the types of vaults available with Beefy Finance?
Money Market Vaults
Utilizes stable lending platforms, such as Fortube, to generate the highest possible yield for these coins (BUSD, LINK, DOT, DAI, USDT, ETH, or BTCB).
Takes advantage of the high yield on popular farms by depositing another asset to earn, sell and compound profits of the native reward token.
Native Token Farming
Takes advantage of the high yield on popular farms by depositing another asset to earn, sell and compound profits of the native reward token.
How much Fees does Beefy Finance Charge?
There is no deposit fee
The withdrawal fee is 0.1% of the withdrawal amount
Performance fee on additional yield – this fees varies and is mentioned on each vault being used
Call fee of 0.5% during each harvest
The Power of Compounding
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Now let us understand how compounding through Beefy helps us with the optimization of our returns. Beefy vaults compound daily, and some vaults compound multiple times a day. These compound functions are integrated into the vault strategies.
Now, for those of you who are not aware, compounding is the most powerful force that can help you with your wealth creation.
APR Vs APYAPR stands for Annual Percentage Rate and APY for Annual Percentage Yield. APR reflects the simple interest rate over a year’s time, while APY describes the rate with the effect of compounding.
This is a crucial difference to understand, as 1% compounded daily will result in a yield of 3678.34% per year.
What are the benefits of Beefy Finance?
Allows all users to become yield farmers effortlessly
Supports all popular wallets such as Trust wallet, Metamask, Walletconnect
Frequent vault updates remove the need for decision making from an independent yield farmer regarding APY maximization
Users don’t need to worry about manually compounding their funds daily or weekly
Thus, it automates the whole farming process. It’s like a “Set and Forget” approach.
is Beefy Finance safe?
As of now, vaults have not been externally audited. So the platform can pose a risk to your investments. Investors are encouraged to DYOR before investing.
The team does take steps to quantify the security risks of smart contracts and only will interact with ones that meet a specific set of requirements. As with any smart contract, there is always a possibility for an investor’s funds to end up stolen or unable to be withdrawn.
Assets deposited into the vault have no risk of decreasing in quantity but can decrease in monetary value. For example – by depositing 10 BNB, you will always be able to withdraw 10 BNB, but BNB may decrease in monetary value during that period of time.
Beefy Finance review
Beefy Finance provides a very lucrative opportunity to automate your yield through its platform. Some of the yield options provide APY up to 650%. From an investment point of view, a user may either invest now or can wait for an independent external audit which is expected to be done in the near future. This will generate more confidence amongst the users of the platform.
We hope we were able to add some value to your knowledge base about yield farming and compounding.
Note: Yield farming is a high-risk aspect of crypto investing, and there are multiple risks associated with it. There were incidents of hacking, and oracle issues have happened in the past, and something you should be aware of. Invest only that amount which you are ok to lose. This guide is only for educational purposes and not intended as investment advice.