Before we get started, this is not a recommendation or endorsement to buy any token mentioned or to use any strategy listed by DeFiLlama. I originally planned to cover how one can wind up a 7x position with wstETH on Euler Finance netting 100-150% APY but given the state of the world post-FTX, I decided last minute to cover a less risky yield discovery tool.
As a follow-up to last week’s tutorial on delta-neutral strategies using DeFiLlama Strategies, I’ll cover an even simpler tool by our friends at DeFiLlama that every DeFi investor ought to be aware of. DeFiLlama has been a long time tool for tracking on-chain metrics like Total Value Locked (TVL), liquidations, and yield strategies.
One of the most important skills to develop in DeFi is being able to find new undiluted yield opportunities. When I use an on-chain search tool like DeFiLlama Yields, I specifically search for yields with these characteristics.
- Passive – Strategies I do not have to babysit and can let run for weeks
- Single token exposure – This way I avoid the complexity of impermanent loss
- Sustainable yield – Real yield, due to real demand, denominated in the token I’m depositing so I do not have to farm and dump rewards tokens
Source: Example of ETH and WBTC lending yields on Ethereum
Today, I’ll show how I could use DeFiLama Yields to filter for single-token lending yields on my preferred L1s and Ethereum L2s.
How to Find Lending Yields with DeFiLlama
Before we get started, please be aware of these risks.
- Smart contract risk in any protocols included in DeFiLlama
- Systemic risk in DeFi composability
- Pegged assets such as stablecoins or stETH can de-peg
- Front-end spoof attack on any DeFi app website
- Exploits in the economic design of any protocol
- Governance attacks or admin key compromise
Here’s how I’d get started:
- First, I go to the DeFiLlama Yields tab. Here’s where I will set my preferences for yields I would prefer to discover and participate in.
- Filter by Tokens: I can specify tokens like ETH + BTC (which will show tokenized BTC yields too)
- Filter by Chain: I normally choose more established L1s like Ethereum as well as L2s like Optimism, Arbitrum, Polygon, and zkSync
- Filter by Project: I’ll leave this alone for now but it’s a great place to potentially isolate yields on more battle-tested DeFi protocols like Aave and Compound
- Filter by Category: There’s lots of choices here but given my preference for simple lending yields this week, I might only toggle these options–Liquid Staking, Lending, Yield, Yield Aggregator, Farm
- Filter by Attribute: Lots to use but my favorites are Single Exposure and No IL
- Filter by min/max TVL: This can be helpful for filtering out lower TVL yields, where risk might be higher due to lesser known, less popular farms
- Filter by APY: I normally skip this filter and simply rank my results by the APY column (see below in red)
- Lastly, I follow the links to whichever strategy if I haven’t already bookmarked the specified dApp and proceed to deposit/stake/lend my tokens and start earning yield.
That’s it! DeFiLlama is a fantastic tool to teach ourselves “how to fish” when it comes to discovering new DeFi yields.
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DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
