FAQs
Why should I choose Olive for my yield farming activities?
Yield farming has emerged as a lucrative strategy in the DeFi space. Notably, newer protocols like GMX offer yields in WETH, a token that doesn't inherently generate yield.
Olive enhances this by automatically converting both your native yield and liquidity mining rewards into LP tokens. This process not only optimises but also auto-compounds your returns. To illustrate, a yield with a 20% APR can achieve a 22.1% APY when compounded daily.
What sets Olive apart is the ability to leverage your farming. With the option to take up to 10x leverage, you can significantly boost your APY. For instance, leveraging a 20% APR LP token at 10x leverage with a 5% borrowing rate can yield an impressive 155% APR. When compounded daily, this translates to a staggering 369% APY.
(1 + (10 x 20% - 9 x 5%)/365)^365 - 1 = 369%
What are the risks associated with using Olive?
The primary risk when leveraging your LP tokens is the amplification of impermanent loss. If the value of your LP token decreases, the loss is magnified by the amount of leverage you've taken.
For instance, with a 10x leverage on LP tokens, a 2% drop in LP value would result in an 18% reduction in your collateral. On the upside, if you achieve a 20% APR during the same timeframe and the borrowing cost averages 5%, your returns could reach up to 369%. This significant gain can help offset the 18% loss from impermanent loss.
Which LP tokens can I farm with Olive?
Olive allows you to leverage yield farm on a wide range of LP tokens. When considering the addition of new LP tokens, factors such as market cap play a crucial role.
All new vaults are onboarded through a governance process. For an updated list of supported vaults, please refer to our vaults list page.
It's important to note that if the value of your LP token decreases relative to the borrowed asset, you may experience impermanent loss. Ensure you understand and are comfortable with this risk before proceeding.
How does Olive differentiate from Beefy?
While Beefy primarily focuses on yield optimisation and auto-compounding, converting LP fees and liquidity mining rewards back into LP tokens, Olive takes it a step further.
Olive offers the added advantage of providing leverage capital, allowing yield farmers to achieve potentially higher APYs.
What potential APY can I achieve using Olive?
With Olive, you can achieve APYs that are up to 10 times higher than traditional methods.
For instance, if you hold LP tokens that offer a 20% APR and the borrowing cost stands at 5%, leveraging 10x combined with weekly auto-compounding can yield an impressive 369% APY.
What about liquidation risks with 10x leverage?
Olive adopts a strategic approach to minimise impermanent losses and subsequent liquidation risks.
For stable pair LP tokens, like USDC-USDT or ETH-stETH, Olive vaults borrow from analogous lending pools (e.g., USDC or ETH) to reduce the risk of IL.
For non-stable pair LP tokens or index tokens, such as Uniswap V2 LP tokens or GLP/GM tokens, the borrowing is done from stable-coin pools, primarily USDC.
What's the expected lending APY with Olive?
Olive's lending pools utilise a dynamic interest rate model, akin to Aave's interest rate model. Consequently, the supply APY is directly influenced by the lending pool's utilisation rate. In essence, as utilization increases, so does the supply APY, and the reverse holds true as well.
Is it possible for me to borrow directly from the lending pool?
No, direct borrowing from the lending pool is restricted. Only authorised vaults have the privilege to borrow. This restriction is in place to safeguard against potential economic threats.
On the other hand, you're welcome to deposit your crypto assets into our lending vaults. By doing so, you can earn passive APRs.
Notably, the returns from our lending vaults often surpass those of platforms like Aave because of astronomically high yield farming returns, even though our lending pool architecture is similar to that of Aave.
Why should I consider lending when I have the option to leverage farm with my crypto assets?
Both - leverage yield farming and lending - offer distinct risk and return dynamics.
Leverage Yield Farming: This can be highly lucrative during periods of elevated LP token yields, minimal impermanent loss (IL), or when the utilisation rate is low. However, it comes with the inherent risk of magnified IL. The degree of IL you experience is directly proportional to the leverage you employ. With excessive leverage, there's a potential for liquidation, especially for tokens prone to high IL.
It's often recommended to exercise caution and opt for moderate leverage (typically 2x-3x) in such scenarios.
Lending: This strategy shines during times of high utilisation rates, allowing lenders to reap attractive supply APYs, all while sidestepping the risks associated with IL.
How much does Olive Charges?
For Vaults: Olive charges 10% to 15% performance fees depending on vault TVL, yield rate and other factors.
For Lending Pools: Olive earns the spread between lending and borrowing rates.
There is no deposit fees, withdrawal fees or management fees for Olive vaults or lending pools. There is no performance fees for lending pools. However, it can be changed by governance in the future.
What security measures have been implemented in the Olive protocol?
Olive Finance is committed to ensuring the utmost security for its users. Here are the key security measures we've put in place:
Flash-loan Protection: We've disabled flash-loans to prevent potential attacks.
Re-entrancy Safeguard: Both read and write re-entrancies have been disabled.
Borrowing Restrictions: Only approved leveraged yield farming vaults can borrow from our lending vaults.
Liquidation Protocol: We've set a trigger for full liquidation at a 10% margin ratio, ensuring the prevention of bad debt accumulation.
Non Upgradable: Our smart contracts are non-upgradable, ensuring predictable behaviour.
SAFU Practices: We've adopted the industry's best SAFU (Secure Asset Fund for Users) practices, drawing inspiration from renowned protocols like Beefy and Yearn Finance.
Governance Oversight: Any addition of a new vault or strategy requires time-locked governance approval, ensuring security through community-driven consensus mechanism.
Comprehensive Testing: Our protocol has undergone rigorous testing, boasting a 100% line and logic test coverage.
Expert Audit: Olive Finance has been audited by rvierdiiev, the top-ranked auditor at Code4Arena, further attesting to our commitment to security.
Who is responsible for auditing the Olive Finance protocol?
The integrity and security of Olive Finance have been thoroughly reviewed by rvierdiiev, who is recognised as the #1 ranking smart contract auditors at Code4Arena.
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