Thread by @n2ckchong

~$1 billion of $ETH is likely to be deployed into DeFi and the market in the coming days as Unsiwap's first UNI yield farming scheme comes to an end.

Let's look over a few places where you could put that Ethereum to work and their risks.👇

https://twitter.com/Wangarian1/status/1326413955204591618

1/ ETH 2.0

If the bare minimum ETH gets staked in the Beacon Chain, validators will get paid 22% APR.

Risks:

- ETH2 will b untradable
- Slashing if you don't run your validator properly
- Extreme opportunity cost; can't bring ETH back from Beacon Chain

2/ Alpha Homora Pools

Alpha Homora allows ETH holders to easily farm yield farming pools (SushiSwap, Uniswap, Index, Mstable, etc.) and LP on AMMs with leverage.

Yields are quite high (15-100%+) due to IL.

Risks:
- Impermanent loss. IL risk is magnified if you take on leverage

3/ Alpha Homora ETH Vault

To allow users to obtain leverage on pools, AH requires a pool of ETH to be drawn from.

Liquidity providers are paid out a steady return in ETH of 3-20%.

Risks:
- Debtors getting liquidated incorrectly
- Cannot withdraw due to high utilization rate

4/ Rari

Rari offers an ETH yield pool that utilizes money markets to obtain yields on ETH. Rari is also offering RGT on all deposits until mid-December.

Risks:
- Smart contract bug

More on yields here:

https://twitter.com/n2ckchong/status/1318700419808284672

5/ Yearn Vaults (soon)

Yearn devs are expected to roll out the second version of the ETH yVault in the weeks ahead.

The first iteration offered like 50% APY before it was unwound.

Risks:
- Smart contract bug

6/ ETH as collateral

Mint or borrow stablecoins with ETH, then deploy stables into yVaults, Pickle Jars, etc.

Simple but involves liquidation risk.

Risks:
- Liquidation risk if ETH drops
- Keeper failure (Black Thursday)
- Smart contract bugs (flash loan exploits)

7/ AMMs

There are many trading pairs on AMMs like Uniswap and SushiSwap that provide high yields (30%+) by simply offering liquidity.

Traders pay a small fee to LPs when they trade on AMMs.

Risks:
- Impermanent loss; the more volatile a pair, the more IL you will incur.

8/ Hegic underwriter

Hegic is an options protocol. Underwriters pool their capital and are collectively short volatility. If options expire worthless, LPs profit.

Hegic LPs are also paid ~250% in future HEGIC.

Risks:

- Volatility can cause LP loss
- Smart contract bug

9/ Holding ETH

There's nothing wrong with holding the ETH that you get back from your Uniswap LP shares.

We're entering a bull market, which could result in ETH passing its previous all-time highs at $1,400.

We're increasingly seeing ETH act as a high beta Bitcoin.

Err... to conclude

Please do your own research and properly swallow the risks when yield farming. A contract may be "audited" but that doesn't mean it's safe.

Don't put all your eggs in one basket.

etc. etc. etc.

For those looking into AMMs, check this out:

https://twitter.com/Wangarian1/status/1327904174122496003

There's a lot of nuances I had to skip out with farms like Hegic and ETH2 due to Twitter's 280 character limit.

May expand on those in later threads.