Getting 9.50% APY on Bitcoin with Polygon and Beefy Finance
I just had to go back and check my transaction history on Polygon to see for how long I was actually farming this pool. I wanted to make sure to get the facts straight when I tell you about this opportunity. I also want to be clear about the risks involved in this article. In the end, DeFi is always risky and you alone are responsible for your deployed capital.
Moving BTC to Polygon from Binance
One month ago I decided to put some of my Bitcoin position to work on the Polygon Network. So far it was just sitting in my Binance account, earning 0.5% APY in their savings vault. So there was definitely room for improvement. First of all I had to explore the ways to move my Bitcoin to Polygon. There is a wrapped version of BTC on Polygon but at first I had no idea how to move it over from my Binance account.
After a bit of research I found a nice bridge from Binance Smart Chain to Polygon. There wasn’t even much of a fee going from BSC to Polygon which was surprising. I think in the end I was using https://www.xpollinate.io/. Their UI was a bit confusing at first, but there was a nice guide how to use and I just followed it step by step.
An important learning was that it is way easier moving stablecoins like DAI or USDC between the chains than a tokenized asset like BTC. So I sold my Bitcoin on Binance and moved it to BSC, bridged to Polygon and bought BTC on Polygon again. This took about 20 minutes, so I didn’t even track whether I made a loss or profit on BTC.
If all of the above sounds like a lot of jibberish to you I totally understand. Before I actively started to use DeFi none of these abbreviations would make any sense to me. If you want to learn more I recommend starting with one chain like Polygon and follow some guides to get started.
Putting BTC to work with Beefy
As I explored different blockchains the phenomenon of auto compounding always looked really nice to me. No manual steps are needed and you can put your capital to work.
One service which is truly available and in my eyes quite trustworthy is Beefy Finance. I used them on Binance Smart Chain, Fantom Opera and recently also on Polygon.
When you are providing liquidity to earn some of the fees in the trading pools, you have to pick trading pairs. You have to pick them wisely and have to make bet how the assets will perform. For example: as I am generally long Bitcoin (I think Bitcoin will increase in value), I would not farm it in a pair with a stable coin as I would miss out on some of the gains Bitcoin could make in the future.
Different variants of wrapped BTC
Enter the wBTC/renBTC pool on Beefy Finance. As it turns out, there are different wrapped versions of Bitcoin on the Polygon Network. And they also need liquidity, so people can swap between their favorite versions. For example if you want to move your BTC through the REN protocol you would need to swap your wBTC to renBTC.
In the end both versions represent Bitcoin on the Ethereum network. Why would someone need that you ask? Well, with Ethereum (or a sidechain like Polygon) come all the advantages of decentralized apps, like lending and borrowing or like in my case providing liquidity.
So long story short, providing my BTC as liquidity in the wBTC/renBTC pool provides me with around 9.5% APY on my Bitcoin while I am fully exposed to the up and downsides of Bitcoin price changes.
Just to clarify, the wBTC/renBTC pool is hosted on Curve.finance which recently started on Polygon as well. Beefy Finance takes the profits from the Curve Pool and reinvests them into the pool. This is known as auto-compounding.
If you want to do this as well, you need to put your Bitcoin into curve (either as wBTC or renBTC) Tipp: if you can choose, take the one that Curve has less of to receive a small bonus. This is possible as Curve wants to keep the balance of their trading pools. The tokens you receive from Curve can be passed to Beefy to join their autocompounding vault.
Of course these returns don’t come for free. Their are multiple risks involved but at least
- Trusting wBTC and renBTC implementations
- Trusting Curve and Beefy with your tokens
- Polygon Network risk
- Smart contract risks
So please make sure you understand what you are doing and never put more money in than you can afford to lose.
And that’s it for today! I hope you enjoyed my article on putting Bitcoin to work on Polygon. Please let me know if you know other interesting farming opportunities on Polygon or elsewhere. I am always eager to learn more about this crazy space.
Until next time,
Please follow me here on Medium to get more stories on Crypto & DeFi
None of this is financial advice. Please always do your own research. Thanks for reading! If you would like to support my work, consider smashing that like button and/or using my affiliate links:
CakeDefi — Start earning dividends on your crypto today — August Promotion: get $50 for depositing funds worth $50!
Binance — the biggest Exchange by volume and save 10% off trading fees forever!
Originally published at https://www.publish0x.com.