Guide to Yield Farming on Arbitrum

We explore some of the yield farming platforms on Arbitrum and where investors can provide liquidity for yield.

Guide to Yield Farming on Arbitrum

Arbitrum is an Ethereum scaling solution based on optimistic rollups that caters for a trustless, secure and Ethereum Virtual Machine (EVM)-compatible Layer 2 (L2).

DefiLlama data currently tracking Arbitrum puts the current TVL on DeFi platforms on Arbitrum to be US$2.26B.

Arbitrum TVL. Source: DefiLlama

In this article, we explore some of the yield farming platforms on Arbitrum and where investors can provide liquidity for yield.

Sushiswap

Sushiswap is a popular cross-chain decentralized exchange platform where you can swap, earn, stack yields, lend, borrow, leverage all on one decentralized, community driven platform.

Yield farming opportunity:

Liquidity providers on Onsen can earn fees and SUSHI rewards by providing liquidity to Sushiswap and staking the LP tokens in the Onsen program. Yields range from 1.5% APR (BTC/ETH) to 74% APR (MAGIC/ETH).

Stargate Finance

Stargate is a fully composable liquidity transport protocol that lives at the heart of Omnichain DeFi. With Stargate, users and dApps can transfer native assets cross-chain while accessing the protocol’s unified liquidity pools with instant guaranteed finality.

Yield farming opportunity:

Stargate has two Arbitrum stablecoin liquidity pools for USDT and USDC. Liquidity providers can stake the SLP tokens in the Farming tab for STG rewards. Yields range from 6% to 10% APR.

Curve Finance

Curve is a multi-chain decentralized exchange liquidity pool designed for extremely efficient stablecoin trading.

Yield farming opportunity:

Provide liquidity to either the tricrypto (USDT/WETH/WBTC) pool for 10% APR in CRV tokens or other incentivized stablecoin pools like the 2pool (USDC/USDT) and eursusd metapool (EURs/2crv) for a low-risk, low-rewards yield opportunity on Arbitrum.

Dopex

Dopex is a decentralized options protocol which aims to maximize liquidity, minimize losses for option writers and maximize gains for option buyers in a passive manner for liquidity contributing participants.

Yield farming opportunity:

Investors can supply option liquidity to an Option Vault and collect option premiums while earning DPX rewards from farms simultaneously. For example, ETH call options have a yield of 12% APR while BTC put options have a yield of 7% APR.

Synapse

Synapse is a cross-chain protocol powering interoperability between chains.

Yield farming opportunity:

Synapse operates two liquidity pools serving as cross-chain bridges. There is an Arbitrum ETH pool (nETH/WETH) with a current yield of 6.97% and a Arbitrum 3pool (nUSD/USDC/USDT) with a current yield of 11.4%.

Balancer

Balancer is an automated portfolio manager, liquidity provider, and price sensor that empowers decentralized exchange and the automated portfolio management of tokens. Pools contain two or more tokens that traders can swap between while liquidity providers put their tokens in the pools in order to collect swap fees.

Yield farming opportunity:

Balancer on Arbitrum has wide array of liquidity pools, from stablecoins only (DAI/USDC/USDT) to more exotic ones with more than 4 tokens. Yields in swap fees and BAL rewards can vary depending on the type of pool and it is controlled by weekly governance votes.

Vesta Finance

Vesta Finance is a collateralized debt platform that allows users to obtain liquidity against their collateral without paying interest. Users can lock up collateral and issue Vesta's stablecoin VST to their address.

Yield farming opportunity:

Vesta currently has two liquidity mining programs for their governance token VSTA. The first one is stability pool staking where you can stake your VST in stability pools to earn VSTA rewards. The second is providing liquidity to their VST liquidity pools.

Jones DAO

Jones DAO is a yield, strategy, and liquidity protocol for options, with vaults that enable 1-click access to institutional-grade options strategies while unlocking liquidity and capital efficiency for DeFi options with yield-bearing options-backed asset tokens.

Yield farming opportunity:

Deposit ETH or gOHM into their Jone Vaults, which utilize an active and hedge options spread to generate yield. Investors can provide liquidity into liquidity pools such as jETH/ETH for 13.8% APR or jgOHM/gOHM for 26.5% APR in JONES rewards.

Beefy Finance

Beefy is a multi-chain yield optimizer that allows its users to earn compound interest on their crypto holdings. Vaults allow you stake your LP tokens and the strategy tied to the specific vault will automatically increase your deposited token amount by compounding reward tokens.

Yield farming opportunity:

Unlike the above, Beefy isn't strictly a yield farm itself, but it is a platform where you can automatically compound your LP tokens deposited on platforms like Sushiswap and Curve.

Yearn Finance

Yearn Finance is a suite of products in DeFi that provides yield generation, lending aggregation, and more on the blockchain, maintained by various independent developers and governed by YFI holders. Their Vaults allow you stake your LP tokens and the strategy tied to the specific vault will automatically increase your deposited token amount by compounding reward tokens.

Yield farming opportunity:

Yearn Finance on Arbitrum supports Curve Tricrypto LP tokens that automatically compounds your CRV rewards for more underlying tokens. The current yield is 6.3%.

Conclusion

The above are just selected yield farming opportunities on Arbitrum. There are hundreds of protocols in the wild and more launching everyday with new, innovative mechanisms to push what's possible in DeFi.

Before depositing money in any of the protocols, always ensure that you've done your research and due diligence. Also read about the risks of yield farming.

Risks of yield farming
Many newbies fall into the trap of depositing into the highest return pools with APY rates that go into the hundreds or thousands. In this article, we evaluate the risks of yield farming in detail.

When you're ready, you can pick up your racks and start being a farmer.

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