It’s nice when things just fit together and the world around us makes sense. It speaks to our basic need for answers–and our appreciation of tidiness. The scientific community has been on an endless hunt for a theory that ties together the key forces around us. If found, the Theory of Everything will change the way we see the universe.
Compared to five years ago (even 18 months ago), the financial world has not only flipped on its head, but has done cartwheels, back flips, and has learned to briefly fly. For many markets, we can no longer rely on past data to predict the risk and returns of a given investment. The lowest risk investments offer essentially no return, and the highest risk investments are skyrocketing–and possibly exploding in a fireball that was your money.
However, before we panic, it’s important to ground ourselves in the financial “theory of everything”: Any investment is nothing more than a gamble, based on a combination of risk, return, and the variance of each. In other words, if you invest a certain amount you can expect X% return, and there is Y% risk you will lose some/all of it.
To make it more complicated, both the risk and return can vary wildly compared to the average. In other words, if you invested in Bitcoin over the last two years it was either an amazing or terrible decision, depending on when you bought and sold it–the overall rise was far from steady, and will likely change drastically many more times.
Risk, return, and variation matter, but the formula is the same whether you invest in T-Bills, stock indexes, local bonds, cryptocurrency, or yield farming. In fact, gambling itself fits into this basic formula as well.
For “luck” based games, the average return is negative, the average risk is high, and the variability is just enough to tease out the occasional jackpot.
There is another type of gambling that uses the risk/return formula but favors the skilled player: poker. If you have some amount of skill, you can actually make money and limit your risk of losing your investment.
If you plotted a graph of risk vs. return, you would find investment opportunities that cover all areas. Given there are few “low risk, high return” options, and we’d like to avoid anything that is “high risk, low return”, we are left with a range from “low risk, low return” to “high risk, high return”.
For traditional assets, the low/low investments include T-Bills, hedge funds, and bonds. High/high investments include real estate and individual stocks (especially penny stocks, which can spike or crash without warning). For crypto, there are no low risk investments. If you’ve read this far, you are not a low/low type of person anyway.
However, there are a few crypto-related options for more medium risk, med/high return strategies that are growing in popularity. Yield farming is, in a way, the successor to staking, and has a number of features the more active investor might enjoy.
On the other hand, there is an emerging player in the crypto world–Virtue Poker–that combines the thrill of poker with a similar risk/return profile to yield farming given their current additional incentives. Could playing crypto-based poke provide a better investment than yield farming? Let’s take a look to compare.
Yield Farming
In order to gain access to usable funds, More and more DEX’s are offering a share of their fees to liquidity providers, and the result is a new breed of investor: the yield farmer. Yield farmers look for good rates (deals) being offered by DEX’s, and provide liquidity for varying lengths of time to get the rewards.
This can provide higher rewards than staking, as Some DEX’s can offer steady rates of 6% or more for farming. Because DEX rates are always changing, however, in order to maximize returns this requires the farmer to be on the lookout for the next “crop” to harvest, sifting through DEX’s to see what rates are best.
The timing for providing liquidity to a DEX is shorter than staking, so the farmers must be looking for the next deal even if their tokens are still tied up. This creates a perpetual cycle of hunting, comparing offers, then weighing the gas fees of making transactions. Further, the farmer is at unfortunate risk of “impermanent loss” if their invested tokens fluctuate in value: They may incur an opportunity cost if the value goes up while farmed, and will have a less valuable token if the price goes down while farmed.
It can be lucrative, but in addition to requiring a good deal of daily attention and the skill required to find a good deal, the luck factor in whether you succeed or fail is uncomfortably high. Though people can make money from yield farming, it should be part of a balanced and risk-managed portfolio.
Jumping from DEX to DEX–in addition to risking gain-killing gas fees–also risks putting money into a DEX that fails, is a scam, or that didn’t correctly audit their smart contracts, opening the door to a potential hack.
Virtue Poker
Though surprising, if you are decent at poker and ready to invest, you can combine the two and earn a nice return on your investment (we told you the last five years have seen a lot of change). This is because Virtue Poker, an online crypto-driven poker platform, is offering a wide range of rewards and bonuses simply for taking part in their tournaments.
Virtue Poker UI. https://blog.virtue.poker/
The number of ways to earn return on your investment is impressive. Overall the team will reward $500,000 GTD to players over their promotional period from May 28th to July 15th 2021. Here’s how it works:
- Earn by signing up and depositing: Players who sign up can earn various rewards depending on the amount they deposit, ranging from earning gas fees back for depositing under 0.1 ETH, to earning an entire 1 ETH bonus–plus 4000 VPP tokens and 400 GP–for depositing 0.75 ETH. Though not scalable to large values, this is a substantial bonus for simply signing up and depositing.
- Earn by maintaining a balance: Players who keep a VPP balance of tokens in their Virtue Poker wallet–independent of play volume. This can earn a rakeback of up to 90%.
- Earn by playing: Players can earn a bonus rakeback of up to 210% if they are among the first to earn grinder points. This means that between holding a balance and performing well, players can earn over 300% rakeback. For individuals who love poker, this might have significantly more appeal than yield farming.
- Earn by participating: The Virtue Poker team is also awarding random daily drawings, a lottery drawing with 10% of the platform rake, and more.
- Earn by winning: During the tournament series, winners can earn VPP, ETH, or a chance to play against Phil Ivey himself.
Which is Best?
Yield farming and Virtue Poker have a lot to offer the engaged investor. Both carry a certain amount of inherent risk, and offer substantial reward for those who are skilled, put in the work, and have a bit of luck.
Which is the best? We can’t say for sure, because the experience will vary for everyone. However, during the Virtue Poker promotion there are a number of lower risk methods to earn a return. Some of it may come down to personality: While yield farming is more of a bargain-hunter mentality, Virtue Poker offers more nail-biting excitement for those who love to play.
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