General
What Do I Earn When Depositing In A Vault?
You get more of the LP token you staked.
What is a yield optimizer?
Defi originates from Uniswap, the first platform on Ethereum that utilizes swaps and liquidity pool tokens. From this, yieldfarms emerged, using LP token staking (a means of bootstrapping liquidity) as a mechanism to reward assets.
A yield optimizer uses smart contracts to automatically compound rewards for staking LP in third-party farms. It maximizes returns by using automation to handle the process of what would otherwise be manually claiming rewards, selling them for tokens, then adding liquidity.
Why use it?
Compounding rewards encompasses five transactions. After staking LP, you need to
claim rewards
sell half of rewards for token0
sell the other half for token1
add these to a liquidity pool in return for LP tokens
deposit the new LP tokens into a farm
Doing this manually, everyday, takes time. With Vaporwave Finance, we do this for you. You don't need to do anything more than stake your initial LP and wait. We handle the rest. You can withdraw at any time.
What is LP?
LP stands for liquidity pool. LP tokens represent a share of the total amount of liquidity that the pair represents, say ETH-USDC. This is the basis for liquidity on all decentralized AMMs like PancakeSwap, SpookySwap, Trisolaris.
What are the risks of LP farming?
Staking LP tokens is not without risk. There is inherent risk to the LP itself, based on the fluctuations of market prices. You can read more about it here.
What is DeFi? Why is it important?
DeFi stands for decentralized finance. It is not without risk, but essentially it is the means through which people can utilize 21st century technology to maximize asset return without the need for centralized banks and governments. As this technology develops, so too does the decentralization. In this way, DeFi empowers people by creating more freedom, as it does not require a central authority to control the technology. The technology remains decentralized, offering higher returns than traditional banking systems.
Each year the inflation rate of fiat currencies continues to reduce the value of what those assets represent. With DeFi and cryptocurrencies, users can utilize their assets to defeat the fiat inflation trap.
My vaults says 365% APY but I don't earn 1% a day
There is a difference between APY and APR.
Initial calculations are made in the estimated daily APR of the farm, or, the annual rate of return.
We calculate APY using different math (see the APY section for more info).
The calculation is not a simple equation of APR/days-per-year
There is an estimated underlying APR of the farm rewards.
This is calculated alongside the price of the reward token and the liquidity value in the pool.
Then we calculate the # of compounds per year.
The % daily will be calculated from this.
As prices change, and liquidity values change, the pool rewards change, so this value will likely not be constant. Welcome to crypto.
This information is meant to be a guide. DYOR!
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