Start Yield Farming on FiLDa!
By Jeremy G and Kenneth K
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On January 5th, Elastos’ lending and borrowing dApp FilDa launched on Huobi’s Heco-Chain. Elastos community members and Hodlers can now transfer their ELA onto FilDa and start lending/borrowing while mining the native token, “FilDa”.
In order to improve transparency, this article includes “Risk Consideration” segments so that users are fully aware of what risks they are taking.
Before beginning, Elastos.info came out with a very helpful guide on how to get started using FilDa. Please review the guide carefully before diving in as there are several steps.
Generally, to participate, you must follow this order of operations:
- Migrate your ELA to ETH Sidechain (CryptoName fee will apply).
- ELA on ETH Sidechain is moved to the Heco chain (Shadow Token bridge fee will apply).
- Purchase and store Huobi Tokens on the Heco chain wallet (0.15 HT is enough to cover several transactions).
- Use the FilDa platform (Borrowing/Lending Platform).
- Earn FilDa tokens.
Your fees may not outweigh your profits. With a roughly .6%-1% fee after migration, you may spend several months to years to “break even” depending on your migration path and your asset APY.
This article will get into the details on how to lend, borrow, and earn the FiLDa token on the platform itself, but first:
Why would you lend?
“Moving money is making money” is the old phrase. When your asset is sitting on your wallet, it is “doing nothing”, which means that it is either losing value to inflation, or at best remaining stagnant and ready for your personal use.
If you have spare assets, allowing others to borrow and pay you interest on those borrowed assets is an easy method for passive income, especially when paid in the asset you’ve lent.
Why would someone borrow?
There are many reasons. The simplest answer is that a borrower may be shorting what they borrow.
Usually, they are taking that asset and selling it with the expectation of rebuying it after the token has dropped in value or a different token that they purchased with the borrowed asset rises in value faster than the borrowed asset.
However, there are other reasons such as to maximize yield farming (the assumption that the FilDa token will have significant value someday) or in other cases, when the APR on FilDa is less than the APY of that asset in another location (borrow to lend to a different place with higher returns).
An example of this second case would be borrowing ETH to stake it and earn staking rewards.
Other reasons are short term loans–arbitrage reasons where a borrow allows the user to have immediate access to liquid funds and quickly take advantage of a price difference in two different locations, all with the expectation of immediate repayment of the loan.
There are also participation requirements such as in Filecoin where miners were required to hold a certain amount of FIL to participate, and it is easier to borrow the FIL and repay it with the mining rewards later.
And finally, there are tax reasons to borrow an asset that will not be covered in this article.
So, how do I get started?
First, go to the FilDA website at https://filda.io/ and be sure your Metamask is set to the Huobi Mainnet Network.
In order to lend, you must deposit one of four coins/tokens.
Simply click the green “Deposit” button to the right of an asset in order to start earning from lending APY and farming FilDa tokens.
Confirm the transaction through Metamask and wait for confirmation.
To be clear, you are offering your tokens to be borrowed by others in a decentralized fashion. In the situation that all assets are borrowed (not enough liquidity in lending pool), then you will not be able to withdraw your asset until a borrower repays that asset.
You are rewarded APY in the asset token that you’ve lended. This APY is dynamic, which means that depending on supply and demand, the numbers may fluctuate and your actual APY may be unpredictable.
Do not base your decisions on short term fluctuations of APY. If, for instance, you pay a 1% fee to onboard to FilDa, seeing an APY of 25%, and then the APY drops to 3%, then it will take you much longer than expected to break even with your costs.
Now that your funds are deposited on FilDa, you can use that capital as collateral and borrow one of the four tokens. Select the “Borrow” button on the right side of the asset.
Based on the collateral deposited, you can borrow upwards of a recommended 50%, which helps avoid the danger of liquidation. Once the transaction is confirmed on Metamask, the user can then have access to the newly loaned funds. Keep in mind the Borrow APR (Annual Percentage Rate).
APR, like APY, accrues automatically, which is essentially compounding interest. This means that your APR owed is not only dynamic and based on supply and demand just like Lender APY, but the interest on your loan is compounding and it could lead to eventual liquidation. In general, borrowing on filDa should be considered best for a shorter term loan.
Should a borrower’s assets change in value pegged to the USD, and should they no longer be able to maintain a 100% collateral, 50% of their assets will be available for liquidation. Liquidations are performed manually by community and team members, and there is a 13% discount on all assets.
10% of this discount is given directly to the liquidator, and 3% is returned to the FilDa platform and will be used to purchase FilDa tokens.
Risk Consideration: Price volatility is very high in crypto. In the case of your collateral and borrowing assets both being highly volatile crypto assets, a 20-50% swing in each in a single day is not unheard of and could lead to liquidation even at only 50% of your initial collateral borrowed.
4 years at 1% each week. 40% is given to Lending and Borrowing Pools, 40% is given to Liquidity Pools, 15% for Insurance Pools, and 5% for the team. There is no pre-mining.
Pool release rates-
15% HT Pool, 25% to ELA Pool, 25% to FIL Pool, 30% to HUSD Pool.
FilDa is used as an insurance pool token during liquidations. More utility may come.
Aside from being a yield farming token, all platform income will be used to purchase FilDa.
filDa token has no current market value. It will be determined by buyers and sellers who can choose any price they wish, and it is not based on the team. Thus, please be careful in purchasing filDa, and when mining filDa, there is no certain cost basis of filDa token. If you choose to purchase filDa at a much higher rate than it stabilizes at, then the decision is based on you and only your decision.
All platform participants will receive FilDa rewards. In order to claim your FilDa rewards, click the top “collect” button, and click once again in order to claim your newly farmed FilDA tokens.
As more pools are added, the rewards for your share of each pool may be reduced.
Because of the 13% discount on assets during liquidation, should the borrower be completely liquidated, as there is not enough collateral available to cover 100% of the loan, the FilDa collected by the platform will be used as insurance to compensate lenders at this point in time.
This means that the additional risk you take on as a Lender is that should someone be liquidated, you are accepting FilDa as compensation for your assets if the borrower is completely liquidated.
There may be insurance pools for specific assets in the future to help carry the burden of liquidations.
The oracle is a private price oracle which obtains data from large exchanges such as Huobi and Binance, and averages the weight of their prices. This price refreshes every 5 minutes to help prevent flash liquidations.
Price Oracles have been a risk factor to DeFi platforms in the past. While the team has done much to secure it against manipulation, this is an additional risks you are taking when you use the FilDa platform.
Final Risk Consideration:
As the platform is quite new, and updates are released, the rules and systems may change. It is important to stay abreast of the most current information. Go to https://t.me/FilDAcommunity to follow developments. Additionally, a github with more details will be released soon.
At time of writing, TVL (Total Value Locked) is just under $15 million. Come borrow, lend, and earn FilDa today on Elastos’ newest DeFi platform!