Add new yield farming pools from DFX Finance to the APY Finance strategies. These fiat backed foreign currency stablecoin pools provide 3 clear advantages to APY Finance:
Attractive yields (>20%)
A hedge against USD inflation (EURS in particular - Can Foreign Currencies Act as an Inflation Hedge?)
In the scenario (proposal phase 2?) where APY Finance adds Deposit support for each of the currencies you open a up a huge new group of users who hold EURS/CADC/XSGD and would be keen to have easy, hands off exposure to a broad group of yield farming strategies in USD - while safe in the knowledge that they will still have exposure to some strategies supporting their native currency.
DFX Finance is a decentralized foreign exchange (FX) protocol optimized for trading fiat-backed foreign stablecoins, (CADC, EURS, XSGD, etc.). It runs on both Ethereum and Polygon chains, I will only consider the pools running on Ethereum in this post for optimal compatibility with the APY Finance platform.
Yield is earned by depositing into one of the USDC paired foreign currency pools. The optimal pools in terms of liquidity and native on/off ramps are Canadian Dollar - CADC, Euro - EURS and Singapore Dollar - XSGD.
These pools are currently paying APY’s of 20.7% (CADC), 26.% (EURS), 25.3% (XSGD) rewarded in the native DFX token when you stake your LP token to the staking rewards contract. The DFX rewards are unlocked immediately.
You can provide single sided or two sided liquidity for any pair. If you provide single sided liquidity (e.g. USDC only to CADC/USDC pool) the contract will automatically perform a swap for a portion of your deposit to other side of the pair, at the optimal % to balance the pool.
This proposal does involve exposure to foreign exchange rate variations through the conversion from USDC to foreign denominated stablecoin. There is a risk of IL based on FX rates at the time of depositing and withdrawing.
The contracts are:
Pools on the DFX site: DFX Finance | App
If successful this proposal would add the USDC/Foreign Stablecoin pools from DFX Finance to the APY Finance yield farming strategies.
In doing so it would provide exposure to non-USD denominated currencies offering a hedge against US inflation while earning yield rewards from DFX.
A risk of IL exists with this hedge, based on the foreign exchange rate of each at the time of deposit and withdrawing for each currency pair, this risk should be outweighed by the hedge and farming rewards.
A second phase of the proposal would add Deposit support on APY Finance for the same foreign stablecoins opening up APY Finance to a whole swathe of new users globally.