Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
Last week, we covered Radiant Capital, an omnichain lending and borrowing protocol, where one can deposit collateral on Arbitrum or BSC and then borrow ETH, WBTC, DAI, USDC, or USDT to a different chain. This is possible thanks to an integration with LayerZero.
LayerZero is an omnichain interoperability protocol. It enables messages to be sent between blockchains, or networks such as L2s. With LayerZero, DeFi applications can become cross-chain without forcing users to bridge assets to different segmented markets the way apps like Aave or Curve work. Cross-chain is the future of DeFi and Radiant is appropriately self-described as omnichain because it provides overcollateralized borrowing to many chains, all at once, in one dApp.
Another flagship application for LayerZero is Stargate Finance–a fully composable native asset bridge. With Stargate, you can bridge supported assets like FRAX or ETH between Ethereum, Arbitrum, Optimism, Polygon, BSC, Avalanche, Fantom and Metis. Meanwhile, Stargate liquidity providers which make bridging possible, can farm their LP tokens in exchange for STG rewards. STG commands a fully diluted market cap of just under $900M today.
Today, I’ll demonstrate how I can provide liquidity with stablecoins or any supported asset on Stargate and potentially earn a future LayerZero ZRO airdrop. This airdrop is not guaranteed but it is expected based on what we know about the team and investors behind LayerZero, who would likely favor a token to govern and use LayerZero protocol.
How to Earn Up to 17% with Stablecoins on Stargate
Before we get started, please be aware of these risks.
- Smart contract risk in LayerZero
- Systemic risk in DeFi composability
- Stablecoins like FRAX are capable of de-pegging
- Front-end spoof attack on the Stargate app
- Economic design exploit, given bridges are a common target for hackers in DeFi
- Centralized controls within Stargate or LayerZero protocols
- Governance attacks on STG
Here’s how I get started!
- First, I go to the Stargate Farming tab and review the tokens, yields, and chains I might support with liquidity. For this example, I rank yields and choose the FRAX pool on Optimism, earning an expected 17% APY based on bridging fees and STG rewards.
- Next, I go to the Pool tab to deposit FRAX into the Optimism bridging pool and end up here. I specify how much FRAX to deposit, given I can always withdraw it later without any lockup. I follow the prompts to approve and deposit FRAX.
- Lastly, I return to the Farm tab and click on the appropriate FRAX Optimism farm to end up here where I can Approve and Deposit my LP tokens.
That’s it! I’m earning a substantial stablecoin yield with a single token on an L2 while potentially earning a future airdrop from the LayerZero protocol.
For more DeFi video tutorials, podcasts, and insights, follow me @DeFi_Dad on Twitter and subscribe to my YouTube channel, my new podcast The Edge Podcast, and The DeFi Podcast with DeFi Dad at defidad.com. If you’re a crypto builder raising capital, my team and I would love to talk at 4RC (Fourth Revolution Capital).
Disclaimer & Risks: This is not financial advice or a recommendation/endorsement to buy any token…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
