What is Pickle Finance?
If you're a fan of Rick and Morty, then you might have a good laugh about Pickle Finance, a DeFi protocol that was inspired from the iconic episode where Rick turns himself into a pickle. But fear not, there's no mad scientist involved in this DeFi protocol, just a team of anonymous developers committed to providing a yield farming protocol that's both innovative and profitable.
The protocol derives its value from farming services. Pickle Finance is responsible for routing users' funds into the most profitable liquidity pools, resulting in higher profits for minimal effort from the users. By pooling funds together, Pickle works as one giant liquidity pool that captures more of the LP fees.
Pickle Finance was launched in September 2020, during the height of the DeFi craze. Since then, the protocol has been through ups and downs. A couple months after its launch, Pickle Finance was hacked for $20M due to a design flaw in its smart contracts. One year later, another devastating $19M hack occurred.
To explain the Pickle Finance hack, it is important to offer some context for how the protocol works. Pickle uses liquidity pools aka jars optimized for yield farming. Users can provide liquidity to the different pickle jars by depositing their crypto tokens, which are then used to provide liquidity to various DeFi protocols. From there, Pickle's automated strategy optimizes yield farming returns by identifying the most profitable liquidity pools and automatically reallocating funds to them. Now, back to the hack.
The attack was a flash loan attack, which is a type of exploit that takes advantage of the ability to borrow and repay funds within a single transaction. The attacker used a flash loan to borrow a large amount of DAI from dYdX, then used that DAI to manipulate the price of cDAI (a token that represents DAI deposited in Compound Finance's lending protocol).
By manipulating the price of cDAI, the attacker was able to manipulate the DAI/ETH price on Pickle Finance's DAI liquidity pool, which caused a loss of funds from the pool. The attack was made possible due to a vulnerability in Pickle Finance's smart contract code, which allowed the attacker to exploit the protocol's price oracle and perform the manipulation.
Once the hack was discovered, the Pickle Finance team quickly responded by pausing the platform's operations and working with security experts to identify and patch the vulnerability. The team also implemented a compensation plan for users who were affected by the hack, which involved the issuance of a tokenized IOU that could be redeemed for PICKLE tokens once the platform was back online.
Explaining the Pickle hack was important because it changed the course of the platform. Weeks after the attack, Yearn Finance announced its partnership with Pickle Finance. The partnership would bolster yield farming incentives, and compensate victims of the hack. Governance of the protocol wasn't affected at all – PICKLE token holders remained in control of the protocol. Basically, Pickle strategies would start earning increased performance fees under the new Yearn fee structure.
Creating new Yearn Vaults, such as the newly merged Pickle Jars, remained completely permissionless, with no voting or KYC required. Additionally, the new gauges emit Pickle tokens, not Yearn’s, and rewards are in DILL (the staked version of PICKLE). As of 2023, the merger between Pickle Finance and Yearn Finance stays strong.
How does Pickle Finance work?
Pickle Finance works by pooling users' funds together and executing strategies that maximize returns. The protocol is similar to Yearn's vaults, in the sense that each pickle jar has its own strategy depending on the network it's deployed (Ethereum, Polygon, Arbitrum).
One key feature of Pickle Finance is its focus on transparency. The strategy of each jar is publicly viewable, and the risks are clearly stated. With this approach, not only did Pickle Finance retain its loyal userbase, but it also managed to stay secure.
Another way to see Pickle Finance is as a compounding service, because Pickle Finance compounds reward tokens earned from farming across multiple DeFi platforms. For example, if a user deposited 1 ETH into the ETH/DAI pickle jar and earned 0.1 ETH in yield, the compounding feature would automatically reinvest the 0.1 ETH back into the jar, resulting in a new total of 1.1 ETH. This process continues over time, allowing for greater potential returns without requiring users to manually reinvest their earnings.
The compounding feature is particularly useful for long-term investors who want to maximize their returns without having to regularly monitor and adjust their holdings. By automating the reinvestment process, Pickle Finance makes it easy for users to earn yield on their crypto with minimal effort.
Pickle Finance Farms
Pickle Finance uses a reward mechanism for yield farmers looking to maximize their yield. Pickle farms reward users with PICKLE tokens in exchange for locking up their Pickle Jar tokens.
Once a user has deposited into pickle jars, he receives pTokens on a 1:1 basis for the cryptos deposited. For example, pETH represents a tokenized version of Ethereum, with each pETH token being fully backed by an equivalent amount of Ethereum. This allows users to easily trade their tokens, while also earning yield on their assets through the pickle jars.
Pickle Jar tokens represent users' position in Pickle's liquidity pool. These pTokens can then be deposited into the Pickle Farm, where they receive PICKLE tokens on top of the yields on the Pickle jar. From there, users have the option to sell their PICKLE tokens, or lock their PICKLE to earn DILL and boost their PICKLE rewards.
Sounds confusing? Well, it shouldn't be. Many DeFi protocols issue their native token to incentivize participation. Pickle Finance uses a lockup mechanism for its PICKLE token to keep its users engaged for the long-term. By staking their PICKLE, users unlock DILL, the governance token of the protocol.
Pickle Finance DILL
DILL is a soft governance token, meaning holders have a limited number of ways to adjust the protocol. Currently, DILL is being used to vote on which farm gets a share of PICKLE emissions.
Voting on farm weights determines how much of the PICKLE emissions a particular Farm receives. Each week, DILL holders get to vote on the allocation. The goal of weight voting is to attract liquidity where it's most needed, by getting DILL holders involved in the protocol governance.
Fundamental changes to the protocol such as the smart contract logic and DILL emissions outside Ethereum and are in the hands of the Pickle core team. At some point, DILL holders will be able to decide on the DILL emissions across all chains where the protocol is deployed.
Participating in the governance process is optional, which is why holding DILL boosts up PICKLE rewards from farming (up to 2.5x).
How to make money on Pickle Finance?
Pickle Finance offers a linear way to make profits over time. This is because the compounding feature shines the longer you keep your tokens locked in the pJars. Making money with Pickle Finance can be a fun journey, where you start small and build up profits from multiple sources available on the protocol itself. Without further ado, let's dive in!
Pickle Finance Jars
The first step of our money making journey starts with the pJars. The protocol supports a wide variety of Ethereum tokens, which should make it quite simple to participate. The idea is to choose a pJar, deposit with it, and let the built-in strategy of the jar find yield opportunities for you. There's no need to do any other action – the yields are automatically reinvested until you choose to withdraw.
To deposit on Pickle Finance, follow these steps:
1. Open the Pickle Finance app
2. Click on the "Jars & Farms" button
3. Select the jar of your choice
4. Input the number of tokens you would like to deposit
5. Approve the transaction
6. Deposit
Once you have deposited, an equal amount of pTokens will be shown in your wallet. They are like a receipt representing your position in the pJar. These tokens automatically earn yield and they can further be used to earn even more!
Pickle Finance Farm
With your freshly minted pTokens, you can now lock them up to earn PICKLE tokens. New PICKLE tokens are emitted every week and each farm receives an allocated a percentage of emissions, based on a vote. Your pTokens continue to produce yield, and now you are also earning PICKLE. What a treat!
To farm PICKLE, follow these steps:
1. Open the Pickle Finance app
2. Click on the "Jars & Farms" button
3. Check the available farms (you need to hold the specific pToken for that farm)
4. Input the number of pTokens you would like to stake
5. Click "Approve & Stake"
Congrats! You have now unlocked a new way to earn on your locked tokens. You can harvest your PICKLE reward for a snack, or move into the third way to make profits
Pickle Finance DILL
Here comes the final method to maximize your gains on Pickle Finance. Once you have harvested your first PICKLE rewards, you can now stake your PICKLE tokens to mint DILL, the governance token of Pickle Finance.
"Wait, why mint a governance token if I don't want to participate in the decision making? I'm only here to make a buck."
Governance is just one aspect of holding DILL. As a DILL holder, you are entitled to a larger share of emissions via Boosted Rewards. Each Pickle Farm has a range of yields, depending on how much DILL the user has locked. The more DILL you have locked, the higher the returns you can achieve.
Every week, 100% of the protocol's weekly revenue is shared with those community members that are DILL holders. A user’s share is equal to how many DILL they control as compared to how many DILL are locked at the beginning of the week.
For example: if a user has 1000 DILL, and there are 500,000 DILL locked, the user is entitled to 1/500 (or 0.2%) of the weekly revenue share. If weekly revenue is $400,000, about $180,000 of that is shared with DILL holders (the rest goes into the treasury.) Based on the example, a user entitled to 0.2% of this should receive $360 each and every week.
To stake DILL, follow these steps:
1. Open the Pickle Finance app
2. Click on the "DILL" button
4. Select which farm to allocate your DILL votes to
5. Submit vote
Price Prediction for Pickle Finance — Can it hit $1000?
Buying and hodling PICKLE — the native token of Pickle Finance — is one way of potentially making money on Pickle Finance.
By looking at its current price, it’s natural to think about the chance of PICKLE 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 PICKLE token by analyzing its tokenomics. PICKLE’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} PICKLE tokens being in circulation today, that means a price of {PRICE} per PICKLE.
How did we come to that calculation? It’s quite easy, the price of a PICKLE 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 PICKLE 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 PICKLE 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 PICKLE to hit that price.
At a price of $1000 per token, that means the current market cap of PICKLE 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. PICKLE’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} PICKLE 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 PICKLE? Taking into account the current price of a PICKLE token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. PICKLE 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 PICKLE 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 PICKLE protocol fully diluted market cap.
These are all crucial details to know when calculating if PICKLE 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 PICKLE depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some PICKLE to your portfolio, the most trusted places to get some are Binance and Coinbase.