Strategy 1: Hold a Token While Earning High Yields at Low Risk; aka Lend & Stake
Whether you’re a beginner to DeFi or a professional institutional user, Alpaca Finance offers a way for you to earn substantial profits safely while doing something as simple as holding your favorite tokens. In our platform, this is Strategy 1: Lend & Stake.
With these two easy steps, you can deposit your tokens to start earning the highest yields in DeFi among lending platforms for single assets.
Rates as of the article's publication date (July 19, 2021)
Such high APYs can be sustainably achieved because Alpaca’s technology offers uniquely high capital efficiency to borrowers, allowing them to open undercollateralized loans for yield farming. As a result, our utilization rates and lending interest rates are consistently 2x(or higher) than that of other protocols.
At the same time, this model is also very safe for lenders, because unlike other lending platforms, borrowers cannot withdraw the borrowed funds from Alpaca. So the use and return of the funds are tightly controlled by the protocol, ensuring lenders receive their funds back.
Our protocol has conservative and quick liquidation settings to make sure bad debt does not occur. What’s more is unlike other protocols, Alpaca has no deposit fees, no withdrawal fees, and no default lockup, so you can deposit and withdraw at any time.
(The only time lending funds could be temporarily locked from withdrawals would be if utilization was very high on that pool, >90%. However, at that point, the protocol’s triple-slope interest rate model and internal balancing mechanism would correct this, push utilization back down within a short period of time and thus unlocking funds. This has proven effective mathematically and historically throughout Alpaca Finance’s existence.)
Now, we’ll show you how you can profit with Alpaca Finance using Strategy 1.
Step 1 — Lend: On the Lend page, deposit your chosen asset. After your deposit, you will automatically receive interest-bearing tokens (ibTokens) in your wallet(If you deposit BNB, you will receive ibBNB). These tokens represent your share of the lending pool, and your lending interest automatically accrues into them.
You’ll notice the values of these ibTokens increasing over time at the same rate as the Lending APR(lending interest is auto-compounded within the ibTokens). This is how you earn the base lending interest. (See more info on ibTokens here)
When you later withdraw, you’ll notice the value of your ibTokens increased relative to your base tokens, which represents your deposited tokens + collected interest.
Step 2 — Stake: On the Stake page, click on the vault representing your ibTokens to open it, and then stake your ibTokens to earn additional rewards in ALPACA.
In the case of ibALPACA token, you will only earn yield from borrowing interest. To receive ALPACA rewards and platform's revenue, please stake your ALPACA in our Governance Vault instead.
That’s it! You can start earning in two easy steps!
To get even more detailed instructions on how to Lend & Stake, you can read the following step-by-step guide in our docs.
You can also check out our Market-Neutral Automated Vault, which is an alternative option for lending with much higher APY here.
And as always, visit our Alpaca Academy to learn more about leveraged yield farming and how to more efficiently earn sky-high yields with Alpaca!