Equilibrium — Mad Science Explained
Equilibrium protocol is an active portfolio management strategy that automates farming across multiple strategies. It continually analyzes available strategies to maximize returns with no additional effort from investors.
Equilibrium automatically performs auto compounding and allocates investments into multiple farms in order to optimize returns and perform the most efficient usage of funds.
The protocol is built from multiple contracts that are operating simultaneously and have built-in triggers with each other.
There will be three strategy levels introduced by YEL Finance to start with:
- H2O (Safe) — 15–25% APY
- Tesla (Medium Risk) — 180–260% APY
- Frankenstein (High Risk) — 1800–4000% APY
How does it work?
Any user may enter the pool with one of four single deposit assets depending on the Network (i.e. ETH, BNB, Polygon or FTM). Once the deposit is completed, the user is accounted for a share of profits based on that user’s share of the total Equilibrium pool within that Network.
Smart contracts monitor and evaluate all farms for the chosen strategy, taking into account: liquidity depth, trading volumes, fees earned for LP and farming rewards.
Once the most profitable opportunity is defined, Equilibrium swaps the original deposit to the required pair to join the pool, and received LPs are automatically placed into the farm.
The contract will be auto-compounding, meaning that the contract will regularly sell half of the received rewards for the needed pair token and allocate it to the liquidity. This will constantly increase the investor’s share of the farm/pool which will generate more trading fees and rewards.
If a new farming opportunity presents itself that is more profitable within the chosen strategy, Equilibrium will automatically reallocate all deposits to the new farming opportunity.
Automated farming strategies
Strategies will span multiple farms and pools. The YEL team will publish a summary and proposal with extended information about new farming opportunities as they arise.
Possible strategies could include: stablecoin pools and farms, native dex farms, aggregated farming strategies from yield optimizers and farms listed in Spectre.
YEL community members will review and vote for adding new farming opportunities to the strategy through the governance process.
Strategies may be modified and expanded as the market continues to grow and new investment opportunities arise.
Conflicts and solutions
There is a possibility that new farming opportunities would not account for large deposits and staking due to reward economics. For example, the current farm pays 500% APR for 2 million USD value locked, the new farm pays 600% APR for 1 million USD locked value. Equilibrium holds 2 000 000 USD value. However, allocating 2 000 000 USD to the new farm would mean that the APR will decrease to 300%.
In such cases, Equilibrium will allocate a portion of the available capital to these farms to ensure that rewards are equilibrated and maximized across the portfolio of farms for a given strategy. Furthermore, Equilibrium will also evaluate the cost of investment relocation and make sure the capital movement is worthwhile.
Returns and ROI
Studies have shown that automated portfolio management delivers 60% better results than individual capital management on average.
This holds true for Equilibrium as well; projected revenue is expected to be $15,000 USD per $2M USD invested per chain.
Annual revenue from the protocol with only 2 million USD capital would be 5 475 000 USD.
YEL Finance will be charging 10% from the generated revenues as management and performance fee, making it 547 500 USD per one network and 2 190 000 USD on four chains.
All generated fees from the protocol will be used to buy YEL tokens from the market and allocate them to the rewards of enhanced pools or vaults.
All rewards and withdrawals will be paid out solely in YEL tokens, meaning the Equilibrium protocol will always trade earnings to YEL tokens before making payouts. This mechanism will create constant buy pressure for YEL, keep trading volumes high and benefit YEL liquidity providers with greater fees in their LPs.
Please note, actualized returns may differ, as they depend on selected risk level, state of the market, farming opportunities available, and short term factors like “multipliers” and “boosters”.
Core benefits of protocol:
- Maximizing ROI by self compounding
- Economies of scale on transaction fees by combining all depositors funds in a single strategy for a given Network
- Occupies most profitable positions
- Creates buy pressure for YEL token
- Increases trading volumes
- Benefits the “Looped demand” ecosystem
- Simplifies market research and investment process
Expected launch date: September 2021
Supported networks: Ethereum, Binance Smart Chain, Fantom Opera, Polygon
About Yield Enhancement Labs:
We are a multichain yield enhancement and aggregation platform with several automated farming strategies. Our mission is to build an ecosystem, with looped demand for YEL tokens, while helping projects to jump-start their liquidity or gather extra holders, and maximizing yields and ROI through our protocols.