Earn is a yield optimizer, built with the purpose to maximize yields for liquidity providers and to accept DeFi 2.0 assets as collaterals.
Earn enhances yields of farms by reinvesting the proceeds. For example, in case of PancakeSwap LP, Earn reinvests $CAKE to buy more LPs to enhance yields. Earn achieves economics of scale by pooling LPs in its contracts, the marginal cost of reinvesting is substantially lower.
Following the DeFi 1.0 era, where DeFi protocols compete to lock up single tokens as liquidity, users now holds receipt tokens as a right to withdraw liquidity instantly from DeFi protocols. In some cases, the right to withdraw is not represented by a receipt token, but locked to a wallet address (i.e. third-party yield aggregators).
When users supply liquidity to other DeFi protocols through Duet Earn, the Earn contract now either holds the receipt token or becomes the address eligible to withdraw liquidity.
Once any asset is supplied to Duet Earn, the user receives credits that could be used to borrow synthetic assets. Meanwhile, Earn issues tokens representing the right to withdraw liquidity called dytokens to the Duet Vault.
Users who've already supplied liquidity to supported DeFi protocols can withdraw their receipt tokens and supply the liquidity again through the Duet Earn to receive credits that can be used to borrow synthetic assets.
For example, a liquidity provider whose PancakeSwap LP token is already supplied to PancakeSwap Farm, can choose to withdraw the LPs from PancakeSwap Farm and deposit again through Duet Earn to enjoy additional Yield and the privillage to borrow synthetic assets.
For users who are not currently a liquidity provider, Duet provides them with a Zap function where they could swap their single tokens into any supported LP tokens, supply the LP tokens to the Duet Earn, gain compounded farming yield and borrow credits with just one click.
The enhanced yield users receive can be decomposed into three main components.
- 1.Yield from thrid-party protocols: Third-party Defi protocols could be actively subsidizing users to provide liquidity, an example of this would be $CAKE rewarded to liquidity providers to certain AMM pairs on PancakeSwap.
- 2.Yield from farming strategies: Enhanced yields from Duet reinvesting proceeds from farms regularly.
- 3.Incentives provided by Duet protocol and partners: Duet incentivizes liquidity providing with $Bonded Duet. Sometimes, Duet and partners will jointly incentize users with even more yield of liquidity providing.
Duet Earn applies different farming strategies to different farms.
AMM V2 LP tokens
Duet supplies LP tokens to farms set up by the AMM-based decentralized exchanges (i.e. PancakeSwap, Uniswap, etc.), reinvests the farm rewards everytime new LP is supplied through Duet Earn or once a day if no reinvest is triggerred by a user.
When reinvesting, Duet Earn swaps farm rewards for more LP tokens and supplies the newly accquired LP tokens back to the relevant farms.
Essentially, Duet Earn at least reinvests and thus compounds the yield from these farms 365 times a year, thus enhancing returns.
Other farming strategies
Duet would expand the supported range of collaterals, and thus develop appropriate farming strategies for more collaterals to come. Also, Duet is eyeing introducing the options strategies.