Beginner’s Guide to Yield Farming on ShimmerEVM

Disclaimer: This article is part of the Iotabee DeFi Honeypot column, providing entry-level knowledge on Decentralized Finance (DeFi) for informational purposes only. It is not intended, and should not be construed, as financial advice. All investment activities should be undertaken cautiously and at your own risk.

Hey, folks! It’s been a while, and there’s been a lot buzzing in the IOTA & Shimmer ecosystem. Exciting stuff!????

Today, let’s dive into the world of yield farming. Yeah, yeah, some of you sharp ones already staked ahead of last Thursday and are enjoying a sizable slice of the cake from the week 1’s reward distribution. But don’t worry, it’s never too late. For those still catching up and figuring out the whole farming thing, we’ve got your back, as always!

Let’s skip the small talk and jump straight to the essentials!

Firstly, what is yield farming?

In simple terms, it’s like putting your crypto to work, earning rewards by lending or staking it in decentralized finance (DeFi) protocols.

How is farming different from providing liquidity?

When you provide liquidity on a DEX, you help develop the depth of its liquidity pool, allowing more traders to swap easily. In return, the DEX shares a portion of its revenue, derived from the swap service fee. On Iotabee, 5/6 of the service fee goes to liquidity providers, and you are free to remove your liquidity at any time; there is no locking period required.

Now, you might think, can’t my money, earning passive income, be a bit more hardworking and have a second job? Absolutely! Here comes one possibility: use your LP tokens for liquidity farming.

Farming allows you to earn extra rewards on those “passive” tokens in the pool. You can use the totality or simply part of your liquidity to participate in the farming. Please note that many protocols require you to stake (or “lock”) your LP tokens for a set period, and you can’t unstake before that period ends. This means:

• If you stake the totality of your liquidity, then your liquidity is “locked” until the staking period ends: you cannot unstake or remove liquidity in advance;
• If you stake only part of the liquidity, the non-staked part can be removed from the liquidity pool at any time, and the staked part can only be unstaked and removed from the liquidity pool when the staking period ends.

On Iotabee, you can choose to stake your LP tokens for 1 week up to 52 weeks.

Once you farm, you earn both 5/6 of the service fee as a liquidity provider AND extra rewards from your staked LP tokens as a farmer (impermanent loss excluded). To learn more about the impermanent loss, check one of our previous articles here.

What should you be aware of when you’re into liquidity farming?

Beyond impermanent loss, understand the farming conditions before participating. Ask yourself questions like: What rewards am I getting? Do I know how to calculate my APR? Does the overall gain outweigh potential losses?

Let’s take Iotabee again as an example.

Currently, we offer farming on sSOON/sETH, sSOON/sBTC (wrapped BTC on Ethereum). sSOON/sIOTA farming will be supported after the Tanglepay team completes their upgrade related to the IOTA Stardust update.

Tips: If you don’t have your ETH, WBTC on ShimmerEVM yet, no worries! Simply use the built-in bridge (powered by IOTAMPC) on Iotabee to wrap them onto ShimmerEVM, and you can then participate directly in the farming.

What rewards are you getting for farming on Iotabee, and what are the conditions?

The total reward pool is 24 million sSOON tokens, evenly split for the three pools, distributed over a 3-year period (8 million sSOON tokens per pool).

Rewards are distributed weekly on Thursdays, and staking before Thursday 00:00 GMT ensures inclusion in that week’s distribution. This also means that the official start date and the end date of your staking is always a Thursday.

For example, if you stake your assets on Tuesday for a week, you are eligible for that week’s reward distribution (as you stake before Thursday 00:00 GMT), and it also means that the staking period ends on the following Thursday instead of the following Tuesday.

You can unstake after your selected staking period ends (1 to 52 weeks), on a Thursday, as mentioned above. If not unstaked at the period end, assets won’t be restaked automatically, and rewards won’t continue.

Rewards need to be vested for 52 weeks before claiming and spending.

You are also eligible for $BUILD token airdrops for providing liquidity and farming your SOON tokens. To lean more about this airdrop, please make sure you follow SoonLabs and Build5 on Twitter to stay tuned.

How do you calculate your farming APR?

The APR displayed on your farming dashboard is the addition of your liquidity pool APR and farming APR. Your farming APR is a rough estimation, calculated by annualizing your WPR (Weekly Percentage Rate), which is the weekly rewards you receive per your staked assets.. For the APR of the liquidity pool alone, you may find the formula in our previous article here.

Alright! I guess you need some time to digust all the information above, so why don’t we wrap it up and call it a day?

Still have questions? Comment to let us know or discuss with us on Twitter or Discord!

If you feel ready , more than ever right now, to put what you have learnt into practice, then waste no more time and visit iotabee.com to start farming! Don’t forget that we also have the start guide with step-by-step instructions.

By the way, if you fancy a more comprehensive read on yield farming, we can really recommend this blog from the IOTA Foundation: https://blog.shimmer.network/beginners-guide-yield-farming-part-1/

Enjoy, and we’ll see you next time in DeFi Honeypot!