🌾AutoFarming
AutoFarming aims to combine the entire process, from swapping, providing liquidity, and yield-optimizing into a single platform.
Providing Liquidity
With the introduction of the AutoConverter on every AutoFarming product page, users can provide liquidity using single tokens in one click. This bypasses users having to manually go to needed LP providers to swap and deposit tokens to receive LP tokens and then coming back for yield optimizing.
Simply click “Open Converter” and the user interface is clear and intuitive.
Farming with AutoFarming
Once single asset tokens are converted to LP tokens, users simply deposit them for maximum yields. Earning yields from trading fees received by providing liquidity and rewards that auto-compound into more LP tokens over time.
Once deposited, head over to the 'Portfolio' page to see current investments and to withdraw. Remember to Redeem LP tokens back into single tokens after withdrawing from vaults.
Additionally, AutoFarming product page shows three key data to provide historical context of the asset:
% with AutoFarming - Returns additional to holding the asset without yield-optimizing at Feeder
% without AutoFarming - The gross returns of the asset
Price - Price of the LP token
Data are collected and shown from the period of product inception.
Strategy Explained
"AutoFarming" helps an investor automatically earn optimized yields through a target platform strategy or directly into endpoints.
How does it work? The users' funds (LP tokens) deposited are taken over to yield optimizers or farms at endpoints. Rewards from deposits, typically in native tokens, are harvested at least once per day, sold, and auto-compounded into more of the same LP tokens to grow users' balances.
Strategy Benefits and Risks
No investment, whether in DeFi or the physical world, is truly risk-free.
Users of AutoFarming benefit from convenience and automation by removing the manual aspect of compounding rewards thanks to target platform auto-compounding. Staking pools and/or vaults typically mint rewards to attract TVL to their platform. However, most do not automatically compound their rewards because they encourage users to keep them and become long-term holders. Feeder Finance appreciates that, and users who wish to be long-term holders should not auto-compound. Others that look for higher APYs, however, would benefit significantly from compounding.
APYs from platform rewards harvesting typically experience wild swings due to their direct linkage with the price of reward tokens. In other words, as target platform tokens rise, so does APY, and vice versa.
The additional risk factor specific to investments in AutoFarming is the nature of how LP tokens work. They are essentially fixed-weighted funds of equal proportion. As one token grows in value, it gets sold to buy the other. Both sides have to balance at all times. The difference between holding both, or one of the two tokens, in isolation versus holding them as LP tokens are what's known as impermanent loss. Learn more about impermanent loss here.
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