Why Non-Collateral Farming is the Next Big Trend
Farming & Mining is a frequently heard word in the crypto space. Yield farming rewards yield in return for staking, staking that rewards you for being part of the consensus layer in blockchain, and liquidity mining rewards trading fees to users for providing liquidity in the pool.
They all look good on the surface, however, all of these conventional farming & mining has risks in nature.
Risk in Yield Farming
Yield Farming is receiving additional tokens besides liquidity mining for greater revenues.
For larger TVL(Total Value Locked) Defi protocols mint their tokens to LPs(Liquidity Provider), providing extra income, eventually leading to high TVL.
This type of incentive model has been popular since the Defi summer.
The downfall of yield farming
Yield farming is proven to be unsustainable because continuous mint for additional incentives leads to drastic inflation of tokens making the price of tokens lower, the other reason is that these unsustainable models bring about competition between protocols — making protocols unstable as LP would move to other protocol whenever higher revenue is available in a different protocol.
This is the reason why Defi 2.0 ‘s POL(Protocol Owned Liquidity) came out. By selling tokens at a discounted price through bonding, they buy back the LP or stable coin to back the token value & provide stable liquidity to the DEX pool.
Risk in Staking
Staking is providing native tokens of a chain to take part in the consensus layer and get tokens in return.
The risk and downside of staking are that your funds are locked up. Users can’t cope with protocol downfall or drastic changes, eventually putting users at risk.
Staking and receiving tokens in returns means that tokens are created each block confirmation, leading to inflation in tokens. The protocol should have a sustainable burning mechanism to maintain token value adequately.
Risk in Liquidity Mining
Liquidity Mining is providing liquidity to DEX(Decentralized Exchange) and earning a portion of trading fees in return.
Liquidity mining exposes users to impermanent loss, any change in the price of both tokens leads to loss.
Users don’t own provided tokens but they own a portion from the pool, so when the price of token changes, the user’s value when deposit alters, and arbitrage traders will add an opposite token to the pool.
No matter which direction the price changes, it is evident that users lose money.
The Solution
Non-Collateral NFT-Farming
The conventional farming strategy requires users to stake an asset, but these kinds of incentive models expose users to risks.
To mitigate all the downside of the conventional incentive model, we propose non-collateral NFT-Farming.
Non-collateral NFT-Farming rewards users with tokens without having to stake. By just owning a certain asset, users get rewards from the protocol.
How does it work?
We utilize creator-earnings(EIP-2981) to incentivize NFT holders. EIP-2981 is about rewarding a portion of the artwork price to foster the artist’s journey in the space. By applying this model with Defi we created a tokenomics that sustainably reward NFT owners without any inflation or risks.
Currently, the source of incentive to users comes from secondary sales from NFT Marketplaces( e.g. Opensea, Looksrare). This way, without getting exposed to inflation & price risks, users receive considerable value from the token in return.
OMC users can harvest wETH every Epoch(24 hours).
Final thoughts
We are currently rewarding users with wETH, but we are creating a sustainable & sophisticated tokenomic to back the token value through these incentive models.
Like Olympus DAO made a big wave in the ecosystem, we will soon make a big wave that lasts. Stay tuned.
— 99% to 1% —
MetaChain Labs
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