CEX.IO Spotlight:What is Harvest Finance?
Key Information (September 22, 2022)
- Circulating Supply — 666,478 FARM
- Total Supply — 690,420 FARM
- Sector — DeFi lending and yield farming
- Token Type — Native token
- Token Usage — Governance, staking, liquidity mining
- Consensus Algorithm — Proof of Stake (PoS)
- Launch Date — September 1, 2020
- All-Time High — $2,236.04
- All-Time High Date — September 2, 2020
What is Harvest Finance?
Harvest Finance is a decentralized automated yield farming protocol built on the Ethereum network. The platform enables clients to deposit their coins and tokens into a range of different lending pools.
The Harvest Finance protocol provides two lending pools: an interest-bearing pool and a savings pool. The former enables users to reap interest on the funds they have deposited, and the latter allows them to accumulate rewards for providing liquidity to the platform.
Additionally, the protocol provides a flash loan option, enabling clients to raise loans against the funds they have deposited without the need for collateral.
What makes Harvest Farming unique?
The Harvest Farming protocol was created to be intuitive and user-friendly for increased accessibility to liquidity solutions. The interface is straightforward and integrated, while the protocol’s whitepaper is concise and coherent.
The platform provides a vast array of features and customization options for all skill levels, making it attractive to both veteran traders and newbies.
In addition, Harvest Farming has multiple upsides that appeal to crypto enthusiasts. First and foremost, it is decentralized, so it’s not susceptible to the whims of third-party authorities. This feature makes it more immune to potential censorship and manipulation compared to its centralized counterparts.
Lastly, the protocol was intended to be scalable. The platform can manage a high number of transactions without encountering lag or downtime. Its architecture is built to be interoperable with other platforms and protocols, including Binance Smart Chain (BSC) and Arbitrum One.
A brief history of Harvest Finance
Yield farming grew more widespread and profitable in the summer of 2020. Due to this, DeFi users on the Ethereum network were forced to perform increasingly complicated and gas-intensive operations to attain the pledged high APY linked with these strategies. To allow users to gain those high yields while simultaneously saving on gas expenses, Harvest Farming was built.
The Harvest Finance protocol was first announced in July 2020. The goal was to provide a decentralized platform that would enable clients to manage their crypto assets securely.
Having been launched on September 1, 2020, the protocol gained more than $1 billion total value locked (TVL) by mid-October. The development team behind the project is not known, but it possesses extensive knowledge of blockchain technology and asset management.
It controls and manages the creation and implementation of new vaults and new vault strategies. FARM, the network’s native token, was given away in a fair launch — meaning there was no pre-mining — when the project went live.
Having reviewed weekly FARM issuance, the community sought to lower the weekly issuance rate by 4.45%. In addition, the community asked to cap the maximum supply of FARM tokens at a total of 690,420. The outcome of such voting was the burning of as many as 14,850.108 FARM tokens.
The protocol quickly gained fame and soon became one of the thriving protocols on the Ethereum network. With the platform growing in success, the team decided to add new features and integration. Thus, in December 2020, the Harvest Finance protocol was integrated with Yearn.Finance (YFI), an eminent DeFi protocol. This merge has enabled network users to swap between crypto assets and yield rewards.
How does Harvest Finance work?
The nucleus of the Harvest Finance protocol is a so-called vault. It is a smart contract that holds deposited crypto assets and carries out yield-generating strategies for its users.
As of 2022, there have been more than 30 different vaults on the protocol, each of which has a unique strategy.
Network users can deposit any ERC-20 token into a vault and start reaping yield rewards instantaneously. As soon as a user deposits their coins into a vault, they will receive an adequate ERC-20 token.
For instance, suppose that a user deposits into the USDC vault, they will receive a fUSDC token. Wrapped tokens (in this case, fUSDC) stands for a depositor’s contribution to the corresponding vault.
The protocol employs a system of oracles to monitor the value of different assets and place trades accordingly. This enables the vaults to automatically purchase assets at low prices and sell them at high ones, thus generating gains without requiring users to perform extra work.
Users can withdraw their deposits at any time. Once the deposits are withdrawn, the associated amount of wrapped tokens will be burned.
The earnings from every vault are redistributed to depositors according to their contribution to the entire pool. Such a system provides users with passive rewards that can be directed to neutralize gas or other Ethereum-based fees.
What is FARM?
FARM is the Harvest Finance protocol’s native utility token which can be used for network governance, staking, and liquidity mining.
As a governance token, FARM enables network participants to create governance proposals and vote for them. This way, users have an opportunity to shape the future direction of the protocol.
Participants in the Harvest Farming network can stake, i.e, deposit their FARM tokens in the profit sharing pools and yield FARM as a performance fee in return for their participation.
Lastly, users can choose to provide liquidity to LPs to reap liquidity mining rewards, as well as a portion of transaction fees. Furthermore, they can stake LP tokens in the Harvest Finance vaults and yield liquidity incentives in FARM.
The Harvest Finance protocol comprises several major components working together:
- Performance fee sharing
Performance fee sharing
Network participants who stake FARM in the profit-sharing pools can acquire performance fees obtained from the yield farming strategies. Those fees are then used to purchase back FARM tokens and distributed to FARM stakers.
FARM tokens that are given to the participants are automatically collected, then re-staked to boost their returns. When this occurs, iFARM is issued a deposit receipt for auto-compounding, serving as an interest-bearing token.
fCASH allows users to take out loans without having to sell their iFARM. Users provide iFARM tokens as collateral and receive fCASH in return. fCASH can be exchanged for stablecoins such as USDC.
What can FARM be used for?
Developed on the Ethereum blockchain, FARM enables its holders to reap yields on their digital assets. The project offers a set of tools to enable users to boost their returns. The set includes a staking pool, plus lending and trading platforms.
FARM’s staking pool lets users stake their digital assets and earn yield rewards from basic investments. The lending platform enables users to lend their assets and reap interest on the loans. The trading platform allows users to trade various assets such as crypto and fiat currencies, as well as ERC-20 tokens.
FARM price history
Only a day after its launch, FARM hit its all-time high amounting to $2,236. Such a high price was believed to be caused by Harvest Finance launching with a circulating supply of 0 tokens.
Several coins went into circulation after the platform kicked off and skyrocketed to high prices in no time. However, only a few weeks after the release, FARM plummeted to about $78. At that time, the “DeFi summer” of 2020 was coming to an end.
In February 2021, during the crypto boom, the token soared to around $410, only to drop to $43.61 in June 2021.
FARM undoubtedly felt the consequences of the spring market crash. The token price again rose to about $303 during the second wave of the crypto boom in 2021. Yet, when the wave died down, it again dragged FARM with it.
Possibly the worst drop in value was seen in October 2020, when a hack took $24 million from Harvest Finance. As a result, FARM plunged by 65% in only one hour. This trend continued in 2022 as well — by May, FARM dipped to a low of $33.35.
The Harvest Finance network mints and delivers new tokens every week. 70% of the new tokens are distributed among the users who provide liquidity to the protocol and offer capital for asset management strategies. 10% is intended for the protocol development, while 20% is kept in the development fund, and occasionally sold via Tornado Cash to refund the developers who created it.
Why choose Harvest Finance
The question of why you should choose one protocol over another cannot be helped. Here are some of the reasons why may want to consider Harvest Finance:
- Security — the Harvest Finance protocol was developed to be safe and secure, and employs high levels of security, such as smart contracts audited by third parties.
- Reaping interest on crypto assets — Harvest Finance allows its users to yield interest on their crypto holdings by loaning them via the protocol. The interest rates are dynamic according to supply and demand, so users can yield competitive returns on their investments.
- Low fees — the protocol charges low fees for its services — the transaction fee is as low as 0.03%.
- Being community-led — the Harvest Finance project is driven by the community. It is open source, so everyone can make their contribution to its development.
Harvest Finance competitors
Even though Harvest Finance was the second-most popular network on DeFi Pulse, it still has strong competitors worth mentioning.
Pancake Swap is a number one automated market maker (AMM) and yield farm built on the Binance Smart Chain network. It is a decentralized exchange that provides numerous features that enable users to earn and win tokens. In addition, it is fast, cheap, and accessible to everyone.
The protocol allows its users to earn CAKE, its native token, through yield farming, staking, and so-called Syrup pools.
DogeSwap is a decentralized global exchange platform with an automated pricing and liquidity system. Inspired by the famous memecoin, Dogecoin (DOGE), DogeSwap was built to make DeFi more efficient. It rewards its holders with high returns via its staking and yield farming ecosystem.
Aave is an open-source and non-custodial liquidity platform for yielding interest on deposits and borrowing crypto assets. It is a decentralized money market protocol in which participants can take part as depositors or borrowers. The former provides liquidity to the market in return for passive rewards, while the latter can borrow in an overcollateralized or undercollateralized manner.
Where to learn about Harvest Finance
To learn more about Harvest Finance, you can visit:
- Official website
- Code review
Harvest Finance updates
In addition to those that have already been implemented, the Harvest Finance team plans to launch multiple new features in the upcoming months. These include staking pools and insurance products, as well as non-custodial wallets. Harvest Finance is also working on moving to the Polkadot network, as it will benefit from Polkadot’s scalability and interoperability features.
To experience Harvest Finance, buy or deposit FARM on the CEX.IO web or mobile platforms.