Asset Allocation Engine
Dual-sided yield enhancing has been a norm of sorts in the industry ever since the liquidity mining boom back in 2020. However, this primitive method of yield enhancing relies on factors like dual-sided staking, protocol trading volume to even begin creating markets for users to derive returns. Such practices rally behind protocol-reinforced fees, which can strongly dampen trading volume. Despite containing massive volumes of liquidity, it is hard to find an efficient and sustainable way of leverage and routing users’ long-term goals.
To that end, Beaver’s dynamic asset allocation engine and single staking module aim to remedy the pain points of yield enhancing.
Another new practice seen in the industry is leverage yield enhancing, wherein protocol introduces a borrowing + swap function to form token pairs for yield enhancing. Here both leverage factors and risk swell up dramatically for the unsuspecting yield farmer:
a. The directional risk is magnified proportionally, which can potentially result in either of the two scenarios - liquidation of borrowed assets and/or dramatically enlarged impermanent loss.
b. The swap process (of 50%) of the staked asset to capture the second asset of the pair will also largely affect the exchange rate. This is especially true in scenarios of a larger supply which in the end generates a sizable amount of impermanent loss, thanks to slippage.
What do you do when you don’t have sufficient ETH to pair with your USDC? What if you are new to DeFi and you don’t understand the process leading up to LP tokens? What do you do when all you want is to avoid slippage? Impermanent loss, it’s eating away all your returns.
Beaver to the rescue!
Beaver’s single asset yield farming module provides users with 100% exposure to one single asset, in contrast to the general practice of LP being exposed to multiple assets. At the same time, Beaver Asset Allocation Engine and pairing algorithms can easily realize returns rates comparable to dual asset yield farming scenarios.
In order to mitigate similar problems as illustrated for the new concept of ‘leveraged yield farming’, Beaver’s asset allocation engine algorithmically pairs equal valued assets from its own novel LP pools to dual asset pairing behind the scenes. This protects the user from directional risk magnification, slippage, and exposure to the risk of highly volatile crypto secondary markets.
Once the 1:1 ratio is achieved for staking, operations like dual token supplying, LP token staking, yield withdrawal, opening and closing of LP positions (when asset supply changes) are automatically implemented in Beaver’s sophisticated smart contracts.
Meaning if you already have 100 USDC ready for supply, Beaver will automatically pair your 100 USDC to X ETH (or whichever asset and ratio, required to interact with a certain strategy). On top of this convenience and flexibility, Beaver also achieves auto-compounding on your assets, as our algorithm constantly invests and reinvests in the most priming strategies across DeFi based on risk tolerance.
In other words, to truly achieve maximized yields, our users only need to initiate the first single-asset staking step. Beaver’s asset allocation engine will take over and execute the remaining complex process.
Initially, the concept might feel lukewarm to a first-time reader, but we assure you that this innovation is the most durable lifevest against impermanent loss and the most reliable channel of creating a deeply liquid market in DeFi.