Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
Originally launched on BSC, Wombat Exchange is a self-described “scalable, low slippage, and single-sided staking stableswap” which looks like a combination of Platypus Finance on Avalanche and the original stableswap AMM kingmaker, Curve Finance. Since launching in April 2022, Wombat has built up a combined $105.57M TVL (including staked WOM) across BSC and Arbitrum with a $183M FDV for its native token WOM.
On Wombat, DeFi users can swap stablecoins with minimal slippage and alternatively earn yields on their assets via single-staking pools with stablecoins like USDC or even newer pegged assets like frxETH by Frax.
In my opinion, Wombat brings no net new innovation to DeFi but it does provide a number of benefits to BSC users and now Arbitrum users having recently launched on Arbitrum on April 5th.
- Slippage minimization: Wombat adopts the asset-to-liability model; slippage is negated until higher transaction amounts and reduced when it occurs.
- User-friendly UI/UX: Simple, accessible UI including single token deposits
- Composability: Single-token LP tokens are ideal for borrowing and lending protocols and trading platforms to build on top of.
- Minimal Impermanent Loss: Like Curve and Platypus, Wombat offers near zero IL thanks to its design and the nature of pegged assets trading on it.
- Boosted Rewards: Earn higher yields in WOM from Boosted Pools by locking WOM tokens between 7 days to 4 years
Similar to Curve’s veTokenomics model, veWOM holders can participate in gauge voting to determine 50% of the WOM emission. Users can allocate their vote (1 veWOM = 1 vote) to one or more gauges, where a gauge corresponds to an LP token of a pool via their dApp. WOM emission via a gauge is proportional to the votes it receives. Like the CRV rewards boosting bribe platform Convex Finance, Wombat offers natively supported bribes. Partner protocols can provide bribes to attract veWOM holders to vote for their pools or tokens to provide more rewards to LP stakers. Those who vote for a bribed gauge are able to receive bribe rewards second by second. Users can check the reward rate and claim rewards in the dApp.
Today, I’ll demonstrate how I can earn single-sided with a frxETH-ETH LP up to 37.6% APR (14.1% APR assuming I don’t hold WOM).
Earn Up to 37.6% APR with frxETH with Wombat on Arbitrum
Before we get started, please be aware of these risks.
- Smart contract risk in Wombat and Frax Finance
- Systemic risk in DeFi composability
- Stablecoins like frxETH are capable of de-pegging
- Front-end spoof attack on the Wombat app
- Admin key risk with Wombat Emergency DAO made up of seven members who can act in times of danger of losing funds
- Governance attacks on WOM
- If there is a severe imbalance in a pool, withdrawing assets with a low coverage ratio could result in a significant withdrawal fee
Here’s how I get started!
- First, I go to the Wombat dApp under the Pool tab and connect my Arbitrum wallet. I pick out which kind of pool I might choose to earn yield with based on what’s in my wallet. In this example, knowing about the ETH-pegged stablecoin frxETH by Frax, I opt for this pool composed of ETH + frxETH. I can earn up to 14.1% APR with just frxETH and if I…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
