Harvest 101: Understanding iFARM and Its Potential
How To Maximize Your Farming Gains with iFARM
As many of you know, a recent proposal to introduce an iFARM token was made, and has passed the Harvest governance vote with overwhelming support, passing with a near-unanimous 97% approval.
The vote on snapshot.page can be viewed here.
In this article, we’re going to be discussing exactly what iFARM token is, and why it’s important for all Harvest farmers.
What is Composability?
In order to understand the implications that iFARM brings to the Harvest ecosystem, we must first understand the concept of composability, and how it is defined. Let’s imagine for a minute that you are starting a business. When considering the things that make a business successful, you must take into account the validity of the product or service you are offering. However, no matter how good the product you are selling, the business is best positioned to thrive in the right environment. Other factors like existing residents, utilities, security, and a vibrant economy could make all the difference in whether your business succeeds or fails.
In a general sense, a platform is composable if pre-existing resources can be built upon and used for other purposes. It allows the same basic tools to be used in multiple applications — saving developers a lot of time building foundations.
When we use the term composability in DeFi, we usually mean that our token can be used in other applications to maximize yield. Say I provide liquidity for a pair on uniswap — receiving an LP token in return. Then say I can stake my LP token on some other site and receive a yield on that LP token. Using this method allows me to earn double the yield, collecting both trading fees and staking returns. The idea of composability allows users to maximize returns by wrapping their tokens in multiple yield-producing layers.
The iFARM Proposal
With the successful passage of this proposal, FARM token will become entirely composable within the DeFi ecosystem. As stated in the governance proposal, the benefits are:
- Easier pool maintenance in the future
- iFARM borrowing/lending and can be used as collateral on crypto money markets
- iFARM as a transferable asset (gas savings)
- iFARM as a composable asset to build upon in the future
By creating the iFARM token, whenever the staking pool is upgraded it will not require users to restake, saving Harvest users even more gas!
How Does iFARM Work?
Similar to the LP tokens you receive when depositing into a liquidity pool, iFARM is a “receipt” that you receive when staking FARM tokens on the Harvest platform. Rather than representing your actual FARM tokens, these iFARM tokens represent your ownership share of the staking pool. Just like LP tokens, when you withdraw your FARM from the pool — your iFARM will be burned.
The actual mechanics of the staking pool remain unchanged. Just like before, 30% of farmer profits will be used to buy back FARM from the market and will be distributed to FARM stakers (iFARM holders). The below diagram is useful to visualize how iFARM fits into the Harvest scheme:
Leveraged FARM Staking?
Once iFARM is successfully listed on a lending/borrowing platform and has been enabled to be used as collateral, iFARM users will be able to use their tokens to borrow other assets — all while continuing to earn yield. An interesting aspect of this is the potential to stake iFARM with leverage. For example, say you deposit $10k worth of iFARM as collateral, and decide to borrow $5k of ETH. With this ETH, you could trade for more FARM and then stake — receiving more iFARM — effectively increasing your FARM yield by 50%! This method would earn leveraged FARM yields as well as lending interest.
The decision to implement iFARM was a good one, and it only serves to brighten the future for Harvest and FARM token and its holders. It not only gives increased yield potential — the composability potential for iFARM to be used in other DeFi applications is even greater! Think of all the potential partnerships and future use-cases that iFARM could be integrated into. This is only the beginning.
For more information on FARM and Harvest, please visit Harvest.Finance and join the Harvest Discord.
DISCLAIMER: This article should not be taken as financial advice. Always do your own research and consult your financial advisor before making any investment decision.