What is Harvest Finance?
Since DeFi has exploded in 2020, humble farmers from all across the world have been tilling their crops to help feed themselves. Some managed to get ample harvest, but many didn't! Farmers are a diverse bunch, they come from all walks of life and have varying degrees of knowledge about DeFi.
As it's been said through the ages "those with insight among the people shall instruct the many," and Harvest Finance was one of the first to do so. The protocol was built by humble Chads with one goal in mind: #BreadForThePeople. 🥖👨🌾👩🏻🌾
Harvest Finance is a powerful tool for maximizing idle capital via an action we call yield farming, or "harvesting." What required manual labor can now be automated to farm the highest yielding assets and distribute the profits among the people.
To explain Harvest Finance protocol, it’s important to mention that no central entity rules the protocol. In true DeFi fashion, Harvest Protocol is completely decentralized. Its rules and parameters are controlled by the FARM token holders, who take great pride and responsibility in their roles. Anyone can submit a proposal on their website and become actively involved in the governance process – no KYC is required.
Harvest Finance mainly derives its value from finding the highest yields to select protocols. In exchange for the service provided, Harvest Finance receives a small fee that goes into maintaining the protocol and rewarding FARM stakers. Upon consulting with the community, core developers are usually in charge of implementing the protocol upgrades. This ensures Harvest Finance stays safe from hacks and the protocol adapts to the market conditions.
The open nature of DeFi encourages protocols to cooperate and innovate. Harvest Finance is one of the first DeFi protocols that emerged during the DeFi summer. However, the protocol went through a couple hard lessons when it comes to security.
Its first incident occurred in October 2020, when Harvest Finance was drained out of $24M. The attacker devised a scheme by which they used arbitrage between multiple DeFi platforms to steal funds. This represented one of the early flash-loan attacks, which meant the team was caught completely off guard.
To cover the gap, Harvest Finance decided to issue a buyback token called GRAIN. One token equals $1 of harvest debt. Once harvest owns the tokens, they can be burned, independent of the price they were bought at. Harvest will continue buying back GRAIN at a price of no more than $1 until they own all of it, at which point the debt will have been repaid.
At that point, the community was contempt with the decision and the TVL of Harvest started to recover.
How does Harvest Finance work?
Harvest Finance is made out of a collection of smart contracts perfected by the Harvest team to utilize the latest and most profitable techniques to bring returns to farmers. Every new project is evaluated by the team and the governance body called "the Council of 69." This is an important process for the sustainability of Harvest Finance, as every newly added project creates more profit opportunities and its risks must be assessed beforehand.
On the good side, beginner farmers can enjoy their crops knowing someone has their back. To give more detail, every project that joins Harvest goes through an audit and is receives a tailored strategy to maximize returns. The strategy is publicly available to be reviewed, and FARM token holders have a say in the decision.
Harvest Finance FARM
In order to provide incentives to yield farmers using the Harvest platform, the $FARM token was released when Harvest Finance launched on September 1st, 2020. The token was bootstrap launched without any pre-mining, venture capitalist, or investor funds, with 0 circulating supply at launch.
A key innovation of the FARM token is that it entitles holders to a performance fee (currently 30% ETH and 8% BSC) taken from Harvest's yield farming strategies. While each strategy may farm different assets, the 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.
The price of FARM is subject to consistent buy pressure as a result. To participate, users must first obtain FARM by collecting incentives for participating in Harvest's yield farming pools, or simply buying FARM directly on the open market. Then FARM must be staked in the auto-compounding Profit Sharing pool.
Harvest Finance Farming
Farming on Harvest Finance is done through vaults. Essentially, the funds of users are being pooled together and used as a whole to minimize gas costs and other charges associated with moving funds through DeFi protocols.
While vault depositors receive 70% of the profits generated by vaults, the high APY and low network fees make for an attractive overall yield. The remaining 30% is used to buy FARM, Harvest Finance's token, off the market. These FARM tokens are then distributed as rewards to stakers in the platform’s Profit Sharing Pool.
Harvest Finance fASSETs
The way each vault allocates funds for yield optimization is based on a specific strategy devised and pre-programmed by the protocol’s developers. When you deposit funds into a vault, you’re issued fASSETs to represent your share of the investment in the vault.
fASSETs are synthetic crypto assets that serve as your deposit certificate to later claim Harvest Finance crypto rewards. Each fASSET corresponds to a deposited crypto asset. For example, if you invest USDC, you’ll be issued fUSDC tokens to represent your share in the vault.
How to make money on Harvest Finance?
Making money of Harvest Finance is as pleasant as riding a tractor though the field. The protocol does all the heavy work of finding the highest yields. All you have to do is spare some crypto tokens, relax, and let the protocol do the rest.
Harvest Finance Farming
Farming with Harvest implies that you already have deposited liquidity into a DeFi protocol and received LP tokens representing your position in the liquidity pool.
These LP tokens can be staked into the Harvest pool where they are routed to the most profitable trading pools. In order to gain access to the yield enhancing capabilities of Harvest, make sure you check their pools first.
Here's how you farm on Harvest Finance:
Open the Harvest Finance app
Navigate to the Farm tab
Select the liquidity pool of your choice and click on it
Inout the amount of LP tokens you desire to deposit
Approve the transaction
Profit
Notice that while scrolling through the liquidity pools there's a tractor 🚜 emoji appearing for some pools. This signals that the pool awards LPs in iFARM tokens on top of the APY.
The beauty about Harvest is that you don't have to do anything after depositing. The protocol will automatically compound your yields until you decide to withdraw.
Price Prediction for Harvest Finance — Can it hit $1000?
Buying and hodling FARM — the native token of the Harvest Finance — is one way of potentially making money on Harvest.
By looking at its current price, it’s natural to think about the chance of FARM hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.
Let’s examine the potential growth of the FARM token by analyzing its tokenomics. FARM’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} FARM tokens being in circulation today, that means a price of {PRICE} per FARM.
How did we come to that calculation? It’s quite easy, the price of a FARM token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each FARM coin.
By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of FARM at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for FARM to hit that price.
At a price of $1000 per token, that means the current market cap of FARM would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.
Now let’s shift our attention to the fully diluted market cap.
Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.
The fully diluted market cap represents the total value of a coin if all tokens were in circulation. FARM’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} FARM which means that no more coins above that number will ever be created.
These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.
How does this impact the price of FARM? Taking into account the current price of a FARM token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. FARM coins that have been burned are not taken into consideration because they have been permanently removed from circulation.
Whether it seems gigantic or not, the number we came to above only takes into account the current price of a FARM token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the FARM protocol fully diluted market cap.
These are all crucial details to know when calculating if FARM can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.
The future of FARM depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some FARM to your portfolio, the most trusted places to get some are Binance and Coinbase.
