The Ultimate Guide to Farming as a Service
Most people suck at yield farming.
Would you do your own plumbing or do your own taxes? Sure, some people do. But most people prefer to outsource it to a professional. You get better results that way.
What if you could outsource your yield farming to a team of professionals? That’s what “Farming as a Service” aims to do. It’s one of the newest sectors in the DeFi space and it’s starting to make a lot of noise.
The DeFi space’s biggest opportunity is in Yield Farming. I’m sure you’ve seen the jaw-dropping ROIs that DeFi projects are offering.
The problem is there’s a high barrier of entry for the average person:
• The learning curve. You can’t even trust the average normie to keep their own keys secure.
• Keeping up with research. How are you supposed to keep up /w alpha if you have a job + kids? I spent 10+ hours a day researching and I can barely keep up!
• Knowing what’s garbage and what’s real.
• Getting in EARLY enough before APY’s drop, and knowing when to exit.
What if you want passive income without the headaches and complexity?
The closest analogy to FAAS is hedge funds. You give hedge funds money, and they should be able to outperform you and the market (in theory). They have more resources and the time to keep up with the markets. You sit back and reap the rewards.
FAAS protocols are offering this service for DeFi. A team of DeFi experts will take your money, and invest it on your behalf. They have the time and access to keep up with the latest narratives and “alpha” in the DeFi space.
Sound good? Let’s see how this works!
The Tokenomics of FAAS
Most of the FAAS protocols are following a general blueprint. They all have their own twists to the formula, but it’s helpful to understand the blueprint.
1. You buy the protocol’s token.
Most FAAS tokens are Ethereum based, but they are expanding to cheaper chains such as FTM & BSC. You can buy them on DEX’s such as @Uniswap Watch out for gas fees and slippage.
2. When you BUY the token, there’s a TAX.
This is how they build the treasury. Here’s an example from @expo_capital, and I ran it through a spreadsheet. Remember that you’re taxed TWICE – when buying AND selling.
Reflections – Paying to join the Club
This is the most controversial part about FAAS. Every time you buy or sell the token, a % of it gets paid to the EXISTING holders. It rewards loyalty. This is useful for the initial ramp-up phase, but it does give off ponzi’ish energy.
3. Utilizing the Treasury
There’s now a war chest that’ll be put to work through farming, trading, and investing in early-stage projects/seed rounds. Remember that not all farmers are equal. They all have different strategies to generate yield.
The great part is there’s transparency. Every FAAS project shares its trades and what’s in its treasury. Look through their dashboards, medium articles, and Twitter accounts to see how they generate yield.
4. Getting paid via Dividends
Once there’s a profit, the protocol may choose to issue you a dividend.
Some stocks like Amazon NEVER pay dividends. They keep all the profits and reinvest it back into growth.
Other stocks pay a dividend such as Johnson & Johnson. Every quarter they distribute $ to its shareholders as a reward for investing in them.
FAAS protocols are choosing the dividend model. Most are paying out in ETH rather than their native tokens. @poordefipenguin put some data together for us on who has issued dividends so far.
Paying you in ETH is badass. This means they’re not printing inflationary tokens, and there’s no downward selling pressure on the native token. Most protocols have a fixed supply, and some are even making it deflationary.
Other Tokenomics:
• These Protocols do buybacks & burns which reduces the token supply.
• Some offer bonds/minting like OHM.
• Majority of the teams are yield farming. They’re starting to branch into private seed rounds and launchpads 🚀
The Major Players in FAAS
You have a ton of FAAS protocols to choose from, and more are being created each week. It kinda reminds me of OHM / Tomb fork season. I’m going to highlight a few of them:
MultiChain Capital @mulchaincapital $BMCC
They were the 1st one, and have the biggest treasury. Their biggest differentiation is they introduced MultiNODES last month. Nodes are controversial – can MCC make nodes sustainable?
Reimagined Finance @ReimaginedFi #ReFi
They have the 2nd largest treasury & known for their transparency. The DAO voted to get RID of the reflections recently. The 12% tax goes straight to the treasury.
They have paid out 1500+ ETH in dividends so far.
There are other players in the space, and they all have slight twists to the formula. Here’s a list that I obtained from @CrossChainAlex. It’s a custom watchlist that he created from @dexscreener
The newer players are adding some innovations to stand out.
@schaincapital – allows minting/bonding
@jpegmorgancap – Generates part of its yield from NFT’s. (DOPE name)
It’ll be interesting to see what other innovations future protocols will bring to the formula.
Which FAAS should you invest in?
So you’re probably wondering which FAAS protocol I’d recommend. I’m trying to stay as objective as possible. Instead, I’d prefer to educate you so you can pick for yourself.
Here’s what I’d look at:
1. Marketcap to Treasury Ratio
How large is their treasury compared to the market cap? It’s kinda like TVL / mCAP to measure L1’s/ This is 1 way to measure value and if you’re getting a “good deal.” I found a recent tracker from
Weekly Faas Update Tracker: 2/20 to 2/27@ReimaginedFi @EXPO_Capital @SChainCapital @FoodFarmerFi @alphacap_io pic.twitter.com/LEGQ27ujrN
— DeFi_Penguin❌🐧 (@poordefipenguin) February 27, 2022
These numbers are hard to compare. Some protocols have already paid off distributions and dividends. The treasury might not reflect their true value. Some of the data is hard to find.
Here’s another tracker from @crosschainalex
2. The Team
There are no “moats” that separate FAAS from each other. There’s no proprietary tech gives them an edge.
You’re betting 100% on the team and their ability to farm the treasury. Imagine if you gave someone $10k, who can increase the ROI the most?
I’d look at the team’s experience. Who are the farmers? Who’s developing and leading the project? Are they anon or doxxed? What are their reputations in the space?
The Team’s communication. Clear writing means clear thinking. How well documented is their GITHUB? Are they communicating their strategy well and in a timely matter?
The Team’s Performance. How has the team performed since its inception? Have they paid out any dividends yet?
The most important thing I’d look at is the farmers.
Imagine if @Bitboy_crypto was in charge of your farming. NGMI.
Here are a few of the leads farmers I found.
• ReFi: @hufhaus9
• FFF: @rektfoodfarmer
• SCC: @eldtrades @mapletarzan
• Expo: @blocmatesdotcom
• ACAP: Anon + @j0rby
3. How’s the Team compensated?
Many FAAS are transparent when it comes to holdings. But it isn’t AS clear on how the teams are compensated, or how many tokens they hold each. 🤔 This is an area that can be improved considering how transparent everything else is.
4. Bear Market Strategies & Risk Management
We’re at an unusual time right now for the space. The Fed wants to raise interest rates, and there’s the Ukraine situation. How are the projects navigating these times? They could get rekt’ed if they’re not careful.
5. STUDY the numbers.
How much of their performance is due to the reflections tax? You want to judge the numbers by the performance of the treasury due to FARMING.
The Bull and the Bear Case for Farming as a Service
I don’t have a horse in this race, so here’s how I’m seeing the sector right now.
Below is a list of all the pros and cons that I see:
The Bull:
It does what it says it does – hands-off degen farming in the hands of professionals. Some of these protocols shined before the bear macro-environment hit, and some of them are still thriving despite the dip.
A lot of these farmers DO know their DeFi from the moves I’m seeing. They can outperform 95% of DeFi farmers.
This is an INEFFICIENT market where insider trading + access is rewarded. It’s hard for you to have “real” alpha as an outsider. The bigger the treasury + influence = more access. You’re able to ride their coattails to get good deals.
The Bear:
Here are a few risks that come with FAAS right now.
The community is tribalistic because of the reflections. This is why you see people flooding comments and fighting for their own. Every time you join they get paid directly.
The main differentiator is the lead Farmers. What happens if the lead farmers leave? It’s kinda like NBA teams where the Superstars make such an impact. Farmers can leave to start their own protocols or leave for a better team.
You’re taxed on the buying & selling. The protocol has to outperform the taxes + gas fees.
It’s a higher-risk investment in a Risk Off environment. I do view this as a high-risk investment. I recommend focusing more on buying blue-chip cryptos and farming stablecoins in a risk-off environment.
Watch out for liquidity/slippage. Some of these protocols have tiny market caps. You could lose some funds due to the slippage and gas fees when you’re exiting.
Their investments are public. You can copy some of the trades yourself if you want. Do keep in mind that some of these trades can be complex, and they’re starting to get into more early-round / launchpad deals.
And finally, DeFi’s barely over 1.5 years old and FAAS around 4 months. Most Hedgefund managers have track records of at least a decade. We don’t know how the farmers perform over the long term.
I view this sector as a 7/10 risk. The risk will lower as the space matures.
Final Thoughts on FAAS
This sector 100% has potential. It’s YOUNG. Expect more players to enter and more innovations to come. Be careful – this bear market will wipe out a ton of players.
You can always wait on the sidelines for the space to mature before investing.
