Before we get started, this is not a recommendation or endorsement to buy any token mentioned.
The last several months have taught every crypto investor–there is no risk-free yield in DeFi or centralized crypto finance. However, despite the downturn in crypto prices and the decrease in economic activity in CeFi and DeFi, new protocols continue to launch on Ethereum, Ethereum L2s, and alternative L1s. One very early stage ecosystem building for EVM-compatible finance applications is Moonbeam. Moonbeam is “a specialized Layer 1 that extends the base Ethereum feature set with additional features such as on-chain governance, staking, and cross-chain integrations.” Moonbeam is designed to tackle cross-chain interoperability challenges by making it easier to deploy applications on Polkadot. The native token used for paying network fees (aka gas) on Moonbeam is GLMR. As of this writing, only ~$150M in assets are transacting across open finance applications on Moonbeam.
As we saw in the bull market, early builders are quick to copy the most popular applications from Ethereum, including decentralized exchanges (DEXs) or automated market-makers (AMMs). StellaSwap is one of the first automated market-makers (AMMs) on the Moonbeam parachain network. StellaSwap offers familiar uses like trading tokens, earning yield as a liquidity provider (LP), and staking LPs or STELLA tokens to earn additional rewards.
Today, I’ll show how I can become an LP in an all stablecoin pool composed of MAI, USDC, USDT, DAI, and FRAX, earning ~25% APR as of this writing, based on yield from trading fees + STELLA rewards. This assumes I either have stablecoins already on Moonbeam parachain or will need to bridge assets using the Moonbeam Native Bridge.
How to Earn Up to 25% APR with Stablecoins on StellaSwap
Before we get started, please be aware of a few major risks.
- Smart contract risk in StellaSwap and Mai Finance
- Oracle failure could lead to an exploit
- Systemic risk in DeFi composability
- Pegged assets such as MAI, USDT, DAI, USDC, FRAX can de-peg and go to $0
- Estimated yield can go up or down depending on the amount of competing liquidity, trading volume, and the price of STELLA rewards
Here’s how I get started!
1. First, I go to StellaSwap’s application and check under Earn -> Farm -> Stables to be certain the estimated APR is still high enough for me to warrant depositing into the MAI <> Base4Pool LP.
2. Once I’m ready to deposit, I can connect my MetaMask wallet using the Connect button in the top right. I should be prompted to add the RPC settings to MetaMask to connect to the Moonbeam parachain network.
3. Next, I hop over to the Bridge -> Native Bridge tab to potentially bridge a stablecoin like DAI from Ethereum Mainnet. I follow the prompts to send DAI in a single transaction.
4. Second, once my DAI or other stablecoins arrive on Moonbeam, I can use the Swap for Gas tab to swap any token for GLMR tokens to pay network fees to transact. For example, below, I’d be trading 5 USDC for GLMR tokens, without needing GLMR to transact this one time.
5. Next, I can go to this deposit pool page for MAI<>Base4Pool and deposit DAI or the other stablecoins in any ratio. I just specify how much and follow the prompts to Approve + Deposit the tokens.
6. Once the tokens are deposited and I’m an LP,…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
