Before we get started, this is not a recommendation or endorsement to buy any token mentioned. DeFi Dad disclosed his team at 4RC invested in the BarnBridge seed round and still holds a BOND position. The following tutorial does not require holding the BOND token.
This week, I was looking forward to potentially highlighting PancakeSwap LP farms recently launched on the new L1 Aptos, but in the interest of pursuing the most sustainable risk-adjusted yield, instead we’ll discuss a new yield on the popular Arbitrum L2, using a familiar protocol for fixed income: BarnBridge.
Back on October 5th 2022, we explored how BarnBridge V2 redesigned a simpler, novel mechanism for users to more seamlessly earn fixed yields. BarnBridge V2 aims to offer fixed rates that are sustainable, with fixed income positions that can be borrowed against on Aave and FiatDAO to get secondary liquidity and leverage a position. In V2, the Barnbridge DAO acts similar to a whale in PoolTogether who deposits stablecoins and gives up the yield earned via a yield source such as Aave, to further subsidize fixed interest earned by lenders.
In other words, the yield in BarnBridge V2 pools comes from yield earned in Aave (and soon Velodrome!) during the last epoch. Then, the cumulative yield earned during the preceding epoch, is redistributed to the epoch of depositors/lenders going forward. The result of this design allows for depositors to bid on the yield to be distributed each Epoch.