Harvest Finance – Industrial Automated Yield Farming for All
Yield farming allows projects to bootstrap their communities through incentives created by distributing their protocol’s token, essentially killing two birds with one stone. While these farming opportunities are open to all participants, making the most of these opportunities requires a certain amount of capital and expertise. And nowadays, yield farming has practically become a full-time job.
Harvest Finance set out to make life easier for farmers big and small. It allows users to farm as a collective to achieve the best risk-adjusted rate for a given asset. Launched on September 1st, 2020 in the midst of the yield farming craze with the slogan, “Bread for the People”, Harvest Finance has gone on to become one of the largest yield aggregators with a vibrant community from all over the world. With farming having become the new norm, using a yield aggregator like Harvest Finance is like using a tractor instead of a manual plow; it’ll take less effort and ultimately be more efficient.
Farming at Scale with Harvest Finance
If you’re new to farming, it seems rather simple. Typically, you deposit a token, stablecoin, or liquidity pool token into a farm to earn tokens at a variable APR. You could simply deposit your assets and come back later to harvest your yield, but you’d be missing out. Manually harvesting and compounding your yields to achieve a higher APY means covering all the gas costs involved. For smaller farmers, the gas costs involved in this process can really start to eat into your returns. Not to mention, you’d need to meticulously calculate and track your APY in order to make sure it was even worth your time or the opportunity cost.
When a user deposits assets into Harvest to farm, they receive fTokens (i.e. fUSDC) which represent a yield-bearing version of the asset. fTokens can be redeemed for the underlying asset at any time. Depositors receive 70% of the profits generated from farming via Harvest as well as FARM token rewards. The remaining 30% is sent to a protocol token buyback and profit sharing program, but more on that later. As the first yield aggregator to adopt a performance-based fee structure, Harvest never charged a withdraw fee as others did. I know what you’re thinking: Why would I give up 30% of my profits when I can farm by myself?
Farming as a collective comes with its advantages compared to going it alone. It can be helpful to think of it as “farming at scale” to reduce operational costs and improve efficiency. If you opted to farm with Harvest Finance in the scenario above, your deposit would automatically compound for a higher APY when possible. Best of all, Harvest covers the gas costs associated with executing farming strategies and compounding deposits. The advantages of Harvest’s collective farming and FARM token design don’t end there though.
FARM token aligns stakeholders of the Harvest Cooperative
The goal of the Harvest Cooperative is to become the world’s largest farming cooperative making the latest yield farming techniques accessible to anyone, even those who are currently underbanked. In order to achieve this goal, the farmers of the Harvest Cooperative pool together resources to earn profits and create additional utility and value for its community of Harvest stakeholders.
At the heart of the Harvest Cooperative is Harvest’s FARM token which incentivizes participation, governs Harvest Finance, and allows users to benefit from the performance of the platform. At launch, FARM started with an initial supply of 0. Harvest Finance bootstrapped its community completely by offering FARM token rewards to depositors and liquidity providers. Only 690,420 FARM will be minted over 4 years with a current emission rate of 4.4% per week. At the time of writing, roughly 50% of FARM tokens have been minted so far. FARM tokens are distributed as follows: 70% of FARM tokens go to depositors and liquidity pool providers, 10% of tokens are vested over 4 years to the Operational Treasury to pay for additional development and promotion, and finally 20% are vested over 4 years to the Development Team.
FARM Buybacks and Profit Sharing Pool
As previously mentioned, 30% of all the profits generated by Harvest are converted to USDC and used to buy FARM tokens off the market. These FARM tokens are then distributed to Harvest Cooperative members with FARM tokens staked in Harvest’s Profit Sharing Pool. FARM buybacks create natural demand for FARM and are fueled purely by how much profit Harvest is able to generate for its users. The idea is that everyone in the Harvest Cooperative from farmers earning token incentives to the initiatives funded by the Operational Treasury benefit when the value of FARM increases further aligning the different Harvest stakeholders.
Harvest Cooperative is able to steer growth and adoption together
The Harvest Cooperative is incentivized to make changes that help the platform grow. Unlike an individual farmer, the Harvest Cooperative has a budget of sorts which it can use to collectively pay for things. FARM holders can create and vote on proposals for new strategies, protocol changes, or even initiatives to be funded by the Operational Treasury. This allows the Harvest Cooperative to stay on top of the latest yield farming strategies. Harvest was the first yield aggregator to release a farming strategy for SWRV, UNI, and Idle Finance. The treasury can also be used to incentivize users to participate in more profitable farms for the Cooperative. The Harvest community also makes use of the treasury to fund programs like creativity contests, bounties programs, and prizes for developer challenges which we’ll cover a bit more later on.
Farming as a collective offers additional forms of risk mitigation
GRAIN reparations after USDC/USDT vaults exploited
On October 26, 2020, an attacker was able to use a flash loan to steal 12.5% of funds from Harvest’s USDC and USDT vaults via an exploit, resulting in a shared loss of $33.8M. The Harvest Community voted to provide reparations to those affected by the exploit in the form of an IOU token known as GRAIN. Those affected were able to claim their share of the $2.48M returned by the attacker as well as GRAIN tokens. Each week 0.5% of the total FARM emissions are sent to reparation pools, GRAIN buyback and FARM/GRAIN liquidity pool, up to the amount lost in the attack. Creating an incentivized FARM/GRAIN pool creates the liquidity necessary to support the buyback program and allows GRAIN holders to receive more FARM rewards for staking their liquidity as well. For those curious, this dashboard has some interesting stats regarding the amount of GRAIN claimed. Solo farmers are often forced to accept losses due to attacks, but as you can see collective farming with an on-going revenue stream offers potential ways to remedy situations such as this.
Harvest Cooperative has a strong sense of identity
Even though Harvest community members are from all around the world (with a notable presence in the Chinese DeFi community), Harvest Cooperative has a strong identity and incentive structure that is welcoming of all. Harvest has previously affirmed their belief that financial inclusion is important for everyone, especially the unbanked and the underbanked. An understated benefit of farming together is that Harvest Cooperative is able express their values and give back to the community as a collective.
From the start, Harvest Finance community has had an appreciation for memes as made evident by their Farmer Chad logo. Anyone who keeps up with DeFi on Twitter has probably seen countless memes of Farmer Chad. This is no coincidence; In the spirit of its #BreadForThePeople slogan, Harvest frequently hosts creativity contests where users are rewarded for their creative contributions to Harvest Cooperative. The most recent Creativity Competition’s theme is “Celebrating the Festive Season”. The cool part about these competitions is that it allows those without the capital necessary to farm to benefit from Harvest Cooperative’s success.
Developers will also find they are warmly welcomed in the Harvest community. Harvest hosts developer contests and has bounty programs to reward developers who want to contribute to the Harvest Finance ecosystem. For those interested, head over to the Harvest Discord’s #dev channel and introduce yourself.
The Harvest Cooperative also expresses their support for the wider community by giving back to programs like Gitcoin Grants which supports future builders. Harvest announced on December 1, 2020 that it would be partnering with Gitcoin to launch a $500k grant matching pool in the latest Gitcoin Grants Round 8.
Partnerships with Harvest Cooperative
Harvest also likes to drive engagement through community partnerships and collaborations that present unique opportunities for Harvest Cooperative members to earn rewards in the form of tokens, NFTs, and more. For example, Harvest will be giving away a total of 80 APYCHADPRO NFTs that grants 90 days of access to the PRO edition of liquidity pool tracker APY.vision to Harvest Cooperative members staking in the Uniswap FARM/USDC liquidity pool. Another example being 88mph’s recently announced 2-week ‘Degen Challenge’ in collaboration with Harvest which encourages participants to build something creative combining 88mph’s fixed-yield pools or floating-rate bonds with Harvest’s vaults. Last but not least, Harvest collaborated with Bitcoin-focused BadgerDAO to help launch Badger DAO’s Harvest SuperSett vault. Harvest community members were also eligible to receive at least 20 BADGER during the launch of Badger token.
With yield farming practically being a full-time job, Harvest Finance has quickly become one of the leading yield aggregators in DeFi. It’s effective use of incentive structures aims to create a positive feedback loop that benefits all stakeholders of the Harvest Cooperative, ultimately forming a strong sense of community. If this farming experience interests you, go explore the opportunities available on Harvest Finance. Or, join the Harvest discord to get to know the Harvest community for yourself. Thanks for reading.
Disclosure: This post is part of our paid promotional DeFi Pulse Drop series; We’ve partnered with Harvest to help educate and inform the community about the Harvest Cooperative. DeFi Pulse received FARM tokens as part of its payment. As always, we’re committed to providing the entire community with quality, objective information, and any opinions we express are our own.