Harvest Finance Review

What is Harvest Finance?

Harvest Finance is a yield aggregator running on Ethereum, Binance Smart Chain, and Polygon. The platform allows users to maximize the return on their deposited assets by executing multiple yield farming strategies across different supported DeFi protocols.  

The Protocol was launched in September 2020 by an anonymous development team, which is still in charge of the platform operation. 

How does Harvest Finance work?

Harvest Finance has over 100 vaults across three supported blockchains with different farming strategies, which are set by the Harvest Finance development team. As soon as the assets are deposited into a particular vault, the smart contract pools all the users’ assets together and channels them to the best yielding platforms according to the assigned strategy, automatically harvesting and reinvesting the generated yield to boost the profitability of the investments, saving the gas costs for users.

Once a user deposits their assets into the selected vault, the protocol yields an fToken in return. This fToken represents a depositor's share of the respective farm. These fTokens are yield-bearing, more specifically 70% of the yields generated as the result of farming strategies is used to increase the value of these tokens, while 30% (8% on BSC) from these profits is charged as performance fee which goes to FARM stakers. On top of that, depositors can earn extra rewards by staking their fTokens and earn FARM tokens.  

fTokens can be transferred between accounts and traded on secondary markets. Deposits can be withdrawn at any point, and as deposits are withdrawn, the corresponding amount of fTokens will be burned. Harvest Finance fees do not include deposit or withdrawal entries.

Farm strategies are the core components of the Harvest Finance ecosystem.  As these strategies define the ways users' funds will be invested, they are said to be thoroughly scrutinized and tested before their deployment. If developers want to change the investment strategy, they must first deploy the new strategy to the blockchain. In order to protect investors from malicious strategies attempting to steal funds, the protocol applies 12-hours time lock on all new strategies. 

As mentioned before, the Protocol collects a 30% (8%) performance fee from the generated profit. This performance fee is used to buy FARM on the open market, which is then distributed to those who stake FARM in the Profit Sharing Pool, which also has an auto-compounding feature. When a user stakes its FARM into Profit Sharing Pool, they receive an interest bearing iFARM token in return. iFARM utilizes the same vault architecture as Harvest's other vaults. 

How to use Harvest Finance?

Before starting using the Harvest Finance App, the user needs to choose the preferred blockchain on the main menu and connect a wallet. The Harvest Finance wallet support includes Metamask, Binance Chain Wallet, and Wallet Connect. 

In the Farm section, the list of available vaults will be displayed with their APYs shown next to them. The 30% Profit Sharing fee is already discounted from the APY of all assets on the main page. After choosing the preferred vault, it is necessary to obtain the corresponding LP token first in the respective DEX. After providing liquidity and obtaining an LP token, the user needs to come back to Harvest Finance, choose the number of tokens to be deposited, and click ‘Deposit’ or click the Max button, which will deposit all the tokens in the wallet. After a pop-up window asking permission for Harvest Finance to manage the LP tokens will appear, the user needs to confirm the transaction by paying the gas fee. As soon as the LP token is deposited, it starts auto compounding, but if the user wants to earn FARM tokens, they can also choose the Staking option. For that to happen, the user needs to tick the ‘Stake for rewards’ box, which is located above the Deposit button, and click the ‘Stake all’ button. 

However, FARM tokens reward doesn't auto-compound and if the user wants to sell them or deposit into Profit Sharing Pool, these tokens need to be claimed first.  

The Profit Sharing Pool is available on Ethereum only. To stake FARM tokens, the user needs to choose the Farm section on the Ethereum mainnet, the iFarm is displayed first on the list of vaults. It is required to click on iFarm, choose the number of FARM tokens to be deposited, click the Deposit button and confirm the transaction by paying the gas fee.

The FARM token

FARM is the native token of Harvest Finance with a maximum supply of 5,000,000 tokens. FARM tokens were distributed in a fair-launch manner when the project was launched in September 2020. It was planned to release these tokens over the period of four years, with the weekly mintage of tokens, which are distributed as follows: 70% - capital and liquidity providers,10% - treasury, and 20% - development team. 

In the fifth week after the fair launch, the token holders voted to reduce the weekly emission rate by 4.45% and also to cap the supply of FARM tokens at 690,420. As a result, a total of 14,850.108 FARM tokens were burned in order to decrease the total supply. Token holders have the voting power to decide on strategic decisions related to the Protocol. However, the day-to-day running of Harvest is handled by Harvest Devs, who decide on incentive distribution, strategy deployment and updates, as well as addition or removal of vaults, etc.

Is Harvest Finance Safe?

In October 2020, Harvest Finance suffered an exploit, which resulted in a total of $24 million loss. The hacker attacked the fUSDC and fUSDT vaults taking advantage of market effects such as impermanent loss, arbitrage, and slippage, meaning that their value can be manipulated via market trades with a large volume. 

The attacker manipulated the value of USDC and USDT vaults deposited on Curve.fi. through a flash loan. The flash loan dropped the price of USDC and USDT, allowing the attacker to buy them at a much cheaper price. In such a manner, having the excess funds on hands, the attacker could pay back the flash loan and keep the profits. Shortly after the attack, the community voted to issue a GRAIN token to recover the losses of those affected by the attack. 

Harvest Finance runs a Bug bounty program with Immunefi with a reward of up to $200,000. 

The Protocol has been found by the anonymous team of developers, who claim responsibility for analyzing each new project's reputation, reviewing tokenomics, verifying smart contracts for safety issues, creating strategies for collecting and auto-compounding rewards.

Partners 

Harvest Finance has numerous integrations across three blockchains such as Uniswap, Sushiswap, PancakeSwap, Curve, Balancer, and many more. Harvest Finance has recently partnered with Universe Finance, Mirror Finance, and APWINE finance bringing more vault variety for users.

What’s next?

According to the Harvest Finance team, the protocol doesn’t have a roadmap as their goal is to remain flexible and therefore they avoid committing to any specific long-term plans. In a broader term, the team aims to become a one-stop solution both for newcomers and advanced crypto enthusiasts.

Links

https://harvest-finance.gitbook.io/harvest-finance/

Author:

Camille A. Hanard

Last updated: Aug 15, 2023