Beefy Finance
Beefy Finance
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Certik Fairyproof
Certik Fairyproof
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Last updated: Jan 06, 2024
Beefy Finance, launched in September 2020 on the Binance Smart Chain (BSC), is a multi-chain decentralized yield optimizer aimed at automating liquidity pool-based investment strategies. Essentially, it's a DeFi (Decentralized Finance) Yield Optimizer project that enables users to earn more on their crypto assets through the process of autocompounding. This process involves the automation of various investment strategies, optimizing earnings from liquidity pools, automated market makers (AMMs), and other yield farming opportunities within the DeFi ecosystem.
The core of Beefy's service is its vaults, which allow users to stake cryptocurrencies and benefit from the platform's auto-compounding mechanisms. These mechanisms automatically reinvest yield profits, enhancing overall gains. An important feature of these vaults is that they are not locked, allowing users to withdraw their funds at any time.
Beefy Finance distinguishes itself in several ways. Its vaults are primarily single-strategy, focusing on optimizing one yield farming opportunity at a time. Safety is a paramount concern, with all products undergoing rigorous safety checks. The platform prides itself on its adaptability, deploying on a wide range of protocols and blockchains. Moreover, Beefy directly distributes platform revenue back to users who stake its native token, $BIFI, in governance pools. This token plays a dual role, granting holders voting rights on key governance decisions and sharing a portion of Beefy's revenue as compensation.
Beefy Finance specializes in yield optimization. It employs a range of strategies to maximize returns from different DeFi activities like liquidity provision, staking, and yield farming. By automating the process of reinvesting returns, Beefy enhances the compounding effect, often leading to higher yields compared to manual farming.
The central feature of Beefy Finance is its vaults. Users deposit their crypto assets into these vaults, which are then utilized in various yield farming strategies. Each vault is linked to a specific investment strategy and automatically executes actions like harvesting rewards and reinvesting them into the pool. This process is crucial in compounding the user's earnings.
Beefy Finance employs a range of investment strategies, each tailored to specific assets and yield farming opportunities. These strategies are continuously monitored and adjusted by the Beefy team to ensure they remain efficient and profitable. The strategies involve interacting with various DeFi protocols, liquidity pools, and automated market makers (AMMs) to earn rewards, which are then compounded for the benefit of the users.
The execution of these strategies is managed through smart contracts. These are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. Smart contracts automate the yield optimization process, ensuring it is efficient, transparent, and trustless.
At the heart of Beefy Finance's architecture are its vault contracts. These contracts are responsible for managing users' deposits. When a user deposits cryptocurrency into a Beefy vault, the vault contract allocates these assets to the appropriate yield farming strategies. The vault contracts are designed to optimize yields by automatically executing investment strategies, harvesting rewards, and reinvesting them. Here is how Beefy Finance vaults work behind the scene:
First users deposit their cryptocurrency into a Beefy Finance vault. The vault supports various tokens, each tailored to specific strategies. Upon deposit, the vault issues 'receipt tokens' or 'shares' to the user. These tokens represent the user's share of the vault and are used to track their investment proportionally.
The deposited assets are then allocated to predetermined yield farming strategies. This allocation is managed by the vault's underlying smart contracts. The vault employs the deposited assets in various DeFi protocols to earn yields. This might include participating in liquidity pools, staking, or other yield-generating activities.
One of the key features of Beefy Vaults is the automatic compounding of gains. The vaults routinely harvest yield rewards and reinvest them, enhancing the compounding effect and potentially increasing the returns.
Users can withdraw their assets, along with any earned yields, at any time. Upon withdrawal, the receipt tokens are returned, and the user receives their share of the vault's current value.
Strategies in Beefy Finance are the action plans, in the form of smart contracts, implemented by the vaults to maximize yield. These strategies are intricate and cater to various aspects of DeFi yield farming. Each strategy is carefully crafted, often focusing on a specific DeFi protocol or opportunity. The strategy dictates how the vault's assets will be used to generate yield.
Strategies involve deploying assets into different DeFi protocols, such as liquidity pools, staking platforms, or automated market makers (AMMs). The strategies include mechanisms for regularly harvesting yield rewards generated from these protocols. Following the harvest, the rewards are typically converted and reinvested to compound the user's earnings.
An essential part of each strategy is risk assessment and management. This involves evaluating the security and stability of the DeFi protocols interacted with, as well as monitoring the overall health of the invested assets. Strategies are not static. They are regularly reviewed and updated in response to changes in the DeFi market, ensuring they remain efficient and effective. The wider Beefy Finance community, through governance mechanisms, can propose and vote on new strategies or modifications to existing ones.
Beefy Finance Boost is a feature designed to enhance users' yield earnings on top of what they already earn from their vault investments. This service is an expansion of the traditional vault offerings, specifically aimed at promoting exciting projects on various chains.
When users deposit in a Beefy vault and receive a 'receipt' token (prefixed with 'moo'), they have the option to stake this token in the Boost program. By doing so, they can earn additional yield on top of their existing vault earnings.
To use Beefy Boost, users first deposit tokens in a boosted vault and then stake their 'mooTokens' in the Boost section. The vault interface provides a summary of the earned tokens, making it easy for users to see their accrued benefits. The actual earnings are a combination of the standard vault yield and the additional boost rewards.
Each Boosted vault has a set duration, visible in the Boost section. Users need to manually unstake their tokens when the Boost ends. They can participate in multiple boosted vaults simultaneously.
Boosted vaults are developed with safety as a priority. They are hosted by Beefy Finance, and the boost tokens are provided by partners, ensuring the integrity. Beefy Finance charges a performance fee on the reward tokens, which is deducted at the start of the Boost. The displayed APR is final and accounts for this deduction.
The APY (Annual Percentage Yield) can fluctuate based on factors like the reward rate and the total amount of deposited tokens. As more users join or leave the pool, the yield distribution changes, affecting the APY.
Beefy-escrowed tokens, or "beTokens," are a unique feature of Beefy Finance, designed to capitalize on the benefits of escrow tokenomics while enabling users to trade their interests in partner governance tokens. These tokens are essentially wrapper tokens implemented by Beefy to facilitate certain functionalities.
In the DeFi context, an escrow mechanism involves users providing their tokens to a third party (like Beefy) to implement functionalities on their behalf. This setup is built around tokenomic designs of the tokens held. Beefy-escrowed tokens (beTokens) are created by Beefy to unlock the benefits of escrow tokenomics, which typically involve staking governance tokens for additional benefits, like earning transaction fees or boosting voting power in governance matters.
Beefy Finance currently offers several Beefy-escrowed tokens, each designed to unlock the benefits of specific tokenomic models of partner protocols. Here's a list of the Beefy-escrowed tokens available:
Each of these tokens is tailored around the different veTokenomic model of Beefy’s partner protocols, offering various features such as withdrawal reserves, supported DEX liquidity, pegged or free-floating pricing, and boosts to associated Beefy vaults. Users can stake these beTokens on Beefy's platform to earn returns, either in more beTokens or in the underlying governance token.
beTokens enable users to trade their interests in the partners' governance tokens, despite those tokens being locked or staked. This mechanism rewards long-term holders of a protocol's governance tokens with more voting power, favoring their interests over short-term holders. Users can stake beTokens on Beefy’s platform to earn returns, either in the form of more beTokens or the underlying governance token.
The voting power associated with escrowed tokens is often used to direct the economics of the relevant protocol, such as distributing new tokens among liquidity pools. Users can stake their tokens in a Beefy Delegator Vault to get beTokens, which are then used in various ways, including earning rewards and participating in liquidity pools.
Beefy Finance's Advanced Vaults include strategies for GMX and GLP. GMX is a decentralized exchange for trading perpetual futures on multiple chains with features like zero price impact and minimal spreads. GLP, a token for liquidity providers on GMX, represents an index of assets used for trading on GMX. Beefy's strategy involves staking GLP in Beefy Vaults on Arbitrum or Avalanche, claiming and staking earned esGMX and multiplier points, and boosting earnings. These Vaults essentially bet against leverage traders while maintaining a stable index position. There's a 15-minute cooldown for GLP transfers, impacting deposits and withdrawals in Beefy Vaults. Users trading on GMX through Beefy's referral link get discounts and rebates.
The BIFI token, central to Beefy Finance's ecosystem, fulfills crucial roles in governance and stakeholder incentivization. As an ERC-20 token, it supports project governance through voting rights and drives participation via governance incentives. The token's contract is simple, upgradeable, and incorporates gasless transactions. Originally launched in 2020, all 80,000 tokens were in circulation by July 2022. Post-migration in 2023, it underwent significant changes, including a transition to Ethereum and the removal of minting capabilities. Derivative tokens like mooBIFI and rBIFI extend their utility in Beefy's incentive programs.
The derivative tokens mooBIFI and rBIFI are integral to Beefy Finance's incentive programs. mooBIFI represents stakes in the BIFI Vault, where incentives are paid in $BIFI tokens and autocompounded for higher APY. rBIFI is linked to the BIFI Pool, where incentives are in ETH tokens. Users must manually claim these ETH incentives. Both tokens reflect the amount of $BIFI staked and streamline incentive distribution, enhancing user engagement and reward maximization within Beefy's ecosystem.
Using Beefy Finance, a multi-chain decentralized yield optimizer is straightforward and involves several steps designed to maximize your investment returns in the DeFi space.
Begin by setting up a DeFi software wallet like MetaMask. For enhanced security, consider using hardware wallets like Ledger or Trezor in conjunction with a web wallet like MetaMask. Once your wallet is ready and funded, connect it to Beefy Finance via their platform. This is done through a “Connect Wallet” button on the Beefy Finance website.
Beefy Finance’s core feature is its vaults. Explore the available vaults on the Beefy app, each offering different investment strategies. These vaults are detailed with information such as Total Value Locked (TVL), Annual Percentage Yield (APY), and specific strategies employed.
Choose a vault that aligns with your investment strategy and deposit your tokens. The process includes granting permission to the vault to access your funds, especially if it’s your first time using that particular vault. Your deposited assets are then utilized in various yield farming strategies, with the aim of maximizing returns. The vaults automatically handle actions like harvesting rewards and reinvesting them. Beefy Finance allows the flexibility to withdraw your assets along with the accrued earnings at any time. The process involves returning the receipt tokens you received upon depositing.
Beefy Finance offers several other features such as Beefy Boost, where you can stake your 'mooTokens' received from vaults for additional yields, and Beefy-escrowed tokens (beTokens) for trading interests in partner governance tokens.
For more experienced users, Beefy Finance provides advanced vaults with specialized strategies, such as those involving GMX and GLP tokens, focusing on specific market segments.
As with any investment platform, it’s crucial to stay informed about updates and changes. Beefy Finance’s Discord server and Snapshot voting page are excellent resources for the latest information and community discussions.
Beefy Finance operates as a decentralized autonomous organization (DAO), guided by its BIFI tokenholders. This governance model includes founders, core contributors, the wider community ("Cowmoonity"), and some external holders. Major decisions, such as fee settings, protocol funding, marketing strategies, and other significant directions, are voted on by BIFI holders. BIFI token holders are entitled to raise proposals (minimum holding of 1 BIFI) and vote on them. Discussions about proposals are encouraged on Beefy's Discord server.
Nevertheless, day-to-day operations are managed by the core contributor team, who act based on the decisions of BIFI holders. However, their decisions can be brought to a governance vote if necessary.
Holding $BIFI, even if it's staked in the BIFI Pool or Vault, grants the right to create and vote on proposals. Voting power is proportionate to the amount of $BIFI held. Users can become delegates to vote on behalf of others, consolidating voting power and making it easier for those with less time to participate in governance.
Various voting methods are employed, including basic voting, single-choice, weighted voting, quadratic voting, and ranked-choice voting. Proposals can be in the form of Beefy Improvement Proposals (BIPs), Beefy Signally Proposals (BSPs), requests for funds, and grant proposals.:
To prevent malicious activities, the core team actively moderates the governance process, with the ability to remove harmful proposals.
The Beefy Finance team operates with a structure that emphasizes decentralization, anonymity, and openness. The team comprises individuals from various nationalities and professional backgrounds, all working towards a common vision of shaping the future of global finance.
Beefy's team operates anonymously, even amongst themselves. This approach is intended to keep the focus on the quality and effectiveness of the project, rather than on individual personalities. Despite the anonymity, team members do participate in conferences and interviews, and they engage in integrations with significant crypto exchanges like Binance, which require personal information disclosure.
Beefy also has a dedicated partnerships team, responsible for managing relationships with existing and new partners. Key members include Weso (Head of Strategic Partnerships), Frondoto and Zapmore (Partnerships Leads), and The Beefy Cow (Social Media/Marketing Lead).
Beefy Finance optimizes yields through vault systems that are based on smart contracts. The project keeps all code public and verifiable on the blockchain.Its vaults automate the best yield farming opportunities, providing functions like using crypto assets as liquidity, providing assets as collateral, managing collateral to reduce liquidation chances, and compounding profits.
The SAFU Protocol at Beefy Finance encompasses a comprehensive set of practices aimed at ensuring the safety of user funds and the overall security of the platform:
Farms must meet strict criteria, including contract verification, sufficient liquidity, removal or timelocking of rug/migrator functions, and timelocked farm token emission rates.
Each new vault undergoes thorough manual testing, which includes deposit and withdrawal processes, reward checking, strategy harvesting, and emergency withdrawal procedures.
Beefy Vaults can adapt to new strategies or changes in reward contracts. New strategies are thoroughly tested in a dummy vault before being applied to live vaults.
A monitoring channel on Beefy’s Discord provides information about changes in smart contracts that could affect vaults, allowing users and the team to assess risks.
In case of emergencies or issues with underlying farms or assets, a panic feature withdraws staked funds back to the strategy contract, ensuring availability for withdrawals.
Although at the moment there is no definitive Beefy Finance roadmap available, due to the project’s decentralized nature all proposals for its future development can be monitored on its Snapshot voting page available at the end of this review. Moreover, discussions on future plans are fully public on the project’s Discord server and Beefy Finance invites everyone to participate.
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Last updated: Jan 06, 2024
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