In this post we are going to talk about the latest Hot DeFi Trend in Crypto called “Real Yield”. The Real Yield Trend has its roots from DeFi projects on Ethereum Layer 2 Blockchains like Arbitrum. We are going to explain why we believe this trend is here to stay and which role the Decentralized Perpetual Exchange https://gmx.io plays in this.
What is Real Yield and how does it work?
Decentralized finance (DeFi) has grown into a booming industry which has shown the massive potential and usecase for blockchains and the cryptocurrency market. With billions of dollars worth of crypto assets locked up in DeFi, there is currently a new DeFi Trend emerging called Real Yield.
The popularity of “yield farming”, a strategy that makes use of crypto assets and promises the users to earn juicy profits, has been one factor contributing to the massive DeFi growth. It enabled crypto investors to maximize their earnings across various DeFi platforms.
However, a lot of Crypto Investors have noticed that the massive inflationary incentives offered by many of these DeFi projects are diluting the price of their tokens without delivering long-term benefits. These inflationary DeFi projects let stakers earn passive income, but the value of the coin which is being paid, goes down more and more due to the massive dilution/inflation, evaporating a big chunk of the promised profits.
The crypto bear market in 2022, and the crash of the Terra stablecoin, shows the drawback and issues with the current DeFi ecosystem.
During the Bear Market, a growing number of DeFi enthusiasts have begun to pay attention to sustainable crypto protocols that reward the stakers based on the real revenue made, or so-called “real yield”. Real Yield is classified as yield derived from the generation of actual revenue, as opposed to revenue derived from token emissions. If this sounds like a dividend in crypto, you’re not far off.
Real Yield operates reflexively: More revenue = more yield paid to users and vice versa. Thus, a bet on a “real yield” project becomes a bet on its ability to a) accrue new users, and b) increase revenue generation overtime to reward token holders.
How to find Real Yield Crypto Projects?
In the Real Yield Checklist below we explain how you can determine if a crypto project really qualifies as “real yield” or not.
What qualifies as a real yield protocol?
- There’s product/market fit. People are using the protocol regardless of market conditions or token incentives.
- The Protocol generates legit on-chain revenue through its products.
- Revenue > Operating Expenses + Token Emissions. Some Token emissions are fine as long as the real revenue is higher.
- Are they paying in sound money or a shitcoin that is getting diluted into worthlessness? The most popular “sound money” choices are ETH or stablecoins.
Questions you should ask yourself, before investing into a Real Yield Cryptocurrency Project:
- Where is the crypto yield coming from?
- How much revenue does the protocol generate?
- What is the native token supply and token emissions?
- What tokens are they paying the shared revenue in?
- What is the overall base network traction?
Most Trending Real Yield Projects
As mentioned previously, any crypto project could be checked if they are generating real yield. Let’s take a closer look at some of the real yield projects.
GMX – Decentralized Perpetual Exchange
GMX is a decentralized perps exchange with zero price impact trades. Trading is supported by a multi-asset pool that earns liquidity providers fees from market making, swap fees, leverage trading, and asset rebalancing. It offers up to 30x leverage on spot crypto trading pairs like BTC, ETH, and AVAX.
This defi protocol is comprised of two tokens: GMX – the utility and governance token, and GLP – the liquidity provider token.
When staking GMX, 30% of the revenue is paid to GMX stakers, while GLP holders get the other 70%. These fees are paid out in ETH or AVAX depending on the Blockchain.
Synthetix – Derivatives Liquidity Protocol
Synthetix is a decentralized finance protocol that provides on-chain exposure to a wide variety of crypto and non-crypto assets. The protocol is based on the Ethereum (ETH) blockchain and offers users access to highly liquid synthetic assets, as well as exposure to real-world assets on the blockchain, such as precious metals, crypto, and fiat.
The platform’s ecosystem is powered by the SNX token. The company shares up to 100% of the revenue with the stakers.
DPX – Decentralized Options Exchange
Dopex is a decentralized options exchange that uses option pools to let anyone buy or sell options in a capital efficient and simplified manner. Its flagship product is Single Staking Option Vaults, which provide deep liquidity for option buyers and automated, passive income for option sellers.
As already mentioned, Dopex uses option pools to allow anyone to earn a real yield passively. This is done by selling options to purchasers with minimal interaction with the protocol. Pool participants can simply deposit base (BTC, ETH, LINK, etc) or quote (USD stable coins) assets to a pool. These would then be utilized as liquidity for users looking to purchase call and put options. At the end of every epoch, pool participants would be able to collect their share of pool holdings. These include premiums paid for all options relative to the size of the pool as well as DPX token rewards at the initial stages as an incentive for providing liquidity.
DeFi Real Yield on Arbitrum
Arbitrum has really become on of the most prominent blockchains on which most real yield projects have had its genisis. This is probably due to its scaling technology and the speed of transactions aswell as the extremely low tx fees with Ethereum as the underlying Blockchain.
Arbitrum is a scaling solution for Ethereum that aims to ease some of the congestion on the network by removing some of the computation required to confirm transactions.
GMX, Umami and other well-known Real Yield projects are living on Arbitrum and push a lot of DeFi enthusiasts to use the Arbitrum Blockchain. With the super fast tx speed and low fees, it has really become one of the hottest platforms for Real Yield projects.
GMX, the Real Yield Bluechip
The GMX Platform is currently one of the hottest Real Yield Crypto Projects on Arbitrum. It is one of the first real yield protocols that shares all of its revenue with its token holders. It has established itself as a bluechip coin around the Real Yield narrative.
GMX is decentralized cryptocurrency exchange that offers spot and perpetual futures trading with low swap fees and zero price impact trades.
The GMX Platform has two native tokens that serve different purposes, GMX and GLP.
The GMX token is the utility and governance coin of the GMX protocol. Owning GMX coins is like owning a piece of the platform and lets you earn “dividends”. 30% of all fees generated from swaps and leverage trading are shared between all the GMX token stakers.
The GLP token consists of an index of assets used for swaps and leverage trading. It can be minted using any index asset and burnt to redeem any index asset. This is GMX’s way of providing liquidity for leveraged trades. It is basically a universal liquidity provider token, which accrues 70% of the platforms generated trading fees.
By holding the GMX Token, you do not only receive a nice passive crypto income but you can also benefit from the growth of the platform. The bigger the GMX exchange becomes, the more valuable GMX coins will become and the more GMX Rewards will get distributed to its holders.