Spectrum Finance: Yield Farming Launches on Ergo and More | by Spectrum Finance | April 2023
We have previously announced the launch of yield farming, but given the complexity of Spectrum Finance’s approach to yield farming, which is based on smart contracts and operates in a fully decentralized manner, thorough testing was essential to ensure the smooth operation of the feature without losses to ensure. We are happy to announce that all tests passed and the feature is now available!
Yield farming, also known as liquidity mining, is a widely used liquidity mining strategy in DeFi protocols. The process is quite simple and involves the following steps:
- Users provide liquidity to a DeFi protocol, essentially adding liquidity to a liquidity pool.
- The users then put (lock) their liquidity into a farming pool.
- The farming pool distributes rewards to users in proportion to their wagered liquidity over a period of time.
Suppose you have 10 ERG and 20 SigUSD in your possession and the current liquidity pool ratio is 1 ERG to 2 SigUSD. You can choose to provide liquidity to the pool and start charging swap fees.
Additionally, an ERG/SigUSD yield farming program distributes 1,000 XYZ tokens among its participants. Let’s say the total liquidity in the pool consists of 90 ERG and 180 SigUSD all committed. By adding 10 ERG and 20 SigUSD to the liquidity pool and using them in the farming pool, you would secure a 10% share of the pool, which entitles you to a reward of 100 XYZ tokens per block.
With this basic understanding of yield farming, we can now dive deeper into Spectrum Finance’s use of yield farming on the Ergo blockchain.
We have a basic understanding of how yield farming works and that it is a method of distributing tokens. There are several methods of distributing tokens across farms, such as using a central service that signs transactions to send tokens to users based on predefined rules. Centralized services are popular because they are easy to build and developers have complete control over distribution rules. In contrast, decentralized options are also feasible, but pose significant challenges in implementation and have certain limitations in the application of the distribution rules.
At Spectrum Finance, we believe in pure decentralization and open source, so anyone in the community can use and benefit from all DEX components, including yield farming.
The technical scheme looks like this. There are two types of participants in the system. The first is the project that creates a yield farming program (farm) and runs off-chain bots that execute transactions to distribute rewards. You may find that the system is not purely decentralized as the project controls the off-chain execution code. However, this does not pose a problem since a) the project has an interest in distributing tokens and b) the execution code is open-source. This allows anyone, including you, to run the code and perform these transactions when the project is unable to do so. The second type of participants are liquidity providers who stake liquidity tokens in farms and earn rewards.
It is important to note that the system works fully autonomously and requires no involvement of the protocol development team or project. Once the farm is started, nobody can change or influence its parameters in any way. Therefore, we recommend projects to evaluate their token distribution in advance before starting the YF program.
⚠️ Keep in mind that due to the decentralized nature of Spectrum Finance’s farm pools, the parameters of a farm program are immutable once it begins and the program cannot be stopped, paused or aborted.
Check the technical specification
Check smart contracts
Check off-chain bots
To encourage liquidity providers to contribute more liquidity to the Ergo AMM protocol, 1,000,000 SPF governance and utility tokens will be distributed across three initial yield farming programs. As of April 28, 2023 at 9am UTC, ERG/SigUSD, ERG/SigRSV and ERG/SPF programs will be available for deposits. Reward distribution will begin from block 995280 (~3 May 2023 18:00 UTC). These farming programs will run until block 1018300 (~90 days).
Bonus distribution in detail:
- ERG/SigUSD – 500,000 SPF
- ERG/SigRSV – 200,000 SPF
- ERG/SPF – 300,000 SPF
After 90 days of active farming, the Paideia DAO toolkit is said to be ready to use. At this point, the team plans to transfer all yield farming allocation tokens to the DAO treasury so that the community can determine the future distribution of SPF via yield farming.
In addition, during the term of the above farming programs, DexyBank will be launched and an additional farming program will be set up for the ERG/Gold liquidity pool.
For information on participating in Yield Farming on Spectrum Finance, see the Policies.
Currently, users cannot create a farm through the UI. However, we have provided ergo-based projects with guidance on how to implement a yield farming program. If you are developing a project on Ergo and are interested in distributing your tokens via yield farming, we encourage you to read these guidelines.
With the release of Yield Farming, we have prepared some more goodies for the users of the protocol.
Firstly, the DEX transaction history in the interface now works almost instantly and also supports fast transaction refunds in case the operation was not performed by off-chain bots.
Second, the SPF token now has real utility and can be used to pay swap fees charged by off-chain operators — the people responsible for running DEX operations.
And there are some UI updates on the LP side:
- Added farming positions
- Added linear price chart
- Added locked liquidity block
If you are interested in becoming a DEX off-chain operator and earning SPF and ERG fees on every swap, here is a guide on how to do it.
Spectrum Finance aims to be a one-stop shop for all your DeFi needs across multiple networks and drive global decentralization. The introduction of yield farming on the Ergo blockchain is another successfully achieved milestone in our journey!
Whether you want to trade, provide liquidity, farm tokens or even execute DEX orders, you can now do it all on Spectrum Finance!
Interested in Yield Farming on Ergo? Visit https://app.spectrum.fi/ergo/farm and start farming today!
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