Before we get started, this is not a recommendation or endorsement to buy any token mentioned.
During a bear market, yields tend to dry up. This is due in part to the selling pressure on newer protocol tokens, which are commonly used as inflationary rewards for lenders, liquidity providers, and stakers. With less noise and froth, comes simplicity in our choices as DeFi market participants. One haven for yield in a bear market is stablecoins, excluding catastrophic depegging of UST. I find stablecoins easier to work with because there’s sustained demand to hold, trade, and lend them in a bear market. Coingecko estimates there’s $154B in stablecoins with $68B in trade volume the last 24 hours.
During the bull run, we saw new DeFi structured products in the form of vaults by teams such as Yearn Finance, which automated investment strategies. These vaults allowed for more users to gain exposure to advanced DeFi strategies. Today, stablecoin vaults remain popular on Yearn, Beefy, Spool, and Vesper, among others. What’s changed is the ability to continually find high yields for stablecoin earning strategies. Instead of constantly hunting for new strategies or relying upon the likes of vault-based protocols like Yearn, what if we can invest in one interest-bearing token as an index of stablecoin yields being passively earned?
A new project launched called Pony Finance offers DeFi’s “one interest-bearing token, with world-class stablecoin yield.” This isn’t a new idea. In fact, PowerPool launched the Yearn Lazy Ape (YLA) Index in March 2021, as an index composed of Yearn vault tokens. Pony offers some subtle improvements, especially now that we’ve transitioned into a crypto bear market, with lots of stablecoin activity beyond Ethereum Mainnet.
- The PONY Index is a composite of low-risk, omni-chain, stablecoin yield farming vault tokens (see diagram below).
- The token PONY is a single, interest-bearing token optimized to boost yields and generate passive income.
- PONY delivers diversified exposure to high-quality stablecoin yields across multiple chains including yields from Ethereum Mainnet, Polygon, Avalanche, and Fantom.
- PONY maximizes a yield/capacity score (weighted geometric average) and diversification “while ensuring the index risk score and index capacity are sufficient and turnover is manageable.”
- The PONY index charges a streaming fee which accrues to the DAO treasury, which is governed by PNYD. So the governance token is basically a claim on that cashflow. As the index itself grows in market cap, more and more fees should accrue to the treasury.
All vaults must pass Pony’s eligibility screenings (ie. chain, yield farming vault platform, stablecoin exposure, yield source, risk score; see Methodology). Currently, the makeup of PONY is as follows:
For those willing to take on the risk of exposure to a basket of these stablecoin yields above, PONY currently offers 7-10% APY, as of this writing. Like other DeFi-native indexes by Index Coop or PowerPool, I can swap with any token here on Uniswap for PONY, currently priced at 1.10 USDC.
One of the current tasks at hand is to deepen liquidity for PONY, which sits at just $1.13M in liquidity on Uniswap v3. As a result, Pony Finance is running a liquidity mining program using xToken Terminal for 2 months, while offering 10% of the supply of…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
