January 18, 2023: Sidechain Roundup βοΈπ
The state of Curve yield farming outside Ethereum Mainnet
Curveβs recent thread on how the market reacted to the pump in crypto had some interesting points, one of which was to highlight TriCrypto on Arbitrum.
This piqued our interest. We always hear about the massive amount of DeFi innovation on Arbitrum in particular. However, this newsletter tends to focus on Curve on mainnet, because the amount of Curve TVL on other chains amounts to a rounding error for Curve.
Itβs a little sad, because the Curve team works very hard to integrate with so many chains. Yet we expect the relative lull in sidechain activity is likely just a bear market phenomenon. Boomers may recall the days when ETH was prohibitively expensive last year; in the likely event this happens again weβd no doubt see the sidechains explode (in the good way).
On this front, Curve is more lopsided towards Ethereum than the broader DeFi market. Across chains, TVL is a bit more spread out, (although this chart is somewhat lopsided due to the weight of BSC/Tron, where Curve has not launched).
DEX volume by chain also shows a similar breakdown, and has been relatively stagnant for about half a year.
Given Curveβs lower share of TVL, itβs quite interesting to see Curve is nonetheless generally around the Top 5 in terms of both TVL and trading activity on each of the largest chains (Arbitrum, Polygon, and Optimism).
Why such low TVL though? Mostly because thereβs been relatively little incentives being tossed towards pools on sidechains. A lot of the incentive activity lately has revolved around Frax incentivizing FraxBP on Ethereum. Activity on sidechains is more sedate.
Arbitrum has just two pools receiving $CRV emissions, with a wstETH pool receiving $LDO.
So itβs sort of surprising Curve is even competitive at all on Arbitrum, given the amount of other Arbitrum-native protocols.
It seems like the scrappy financial wizards on Arbitrum might be more inclined to grab for this free money.
Or maybe this number is just skewed by the recent run-up in pricesβ¦
Arbitrum is also the only fork supported by Convex, which is where most Curve LPs on Ethereum wind up. Since the supermajority of LPs rely on Convex to boost Curve yields, rather than playing the four-year lock game, Arbitrum would seem to be the only chain where LPs could easily get take advantage of the boosts.
Optimism, where Curve hasnβt even launched TriCrypto, has a bit more in the way of activity.
The 4.63% β 11.59% yield on sBTC/WBTC would be market leading, but without Convex, it would require a hefty veCRV stack to make this yield significant. The Synthetix pools are offering good yield mostly thanks to $OP rewards.
Curve may also be eligible to receive such rewards as well, though something may be gumming up the works. Worth keeping an eye on Optimism yields should this happen.
Polygon, the home of light fees and heavy bizdev, has at least one eye-popping pool. See if you can find itβ¦
The $CRV/TriCrypto and its record 6 coins have a juicy 86% $CRV. However, very few have the veCRV to boost this at size, so the 34.5% base rate is somewhat in line with $CRV yields on mainnet.
FWIW, the Polygon network had an upgrade yesterday, a non-contentious hardfork to battle some issues with reorgs and spam.
The same story as we see on the first few chains also plays out on Fantom, which offers good yields for veCRV whales, or yields in line with mainnet for those who rely on Convex to access the superlative boosted rate.
Avalanche a tick lower, but largely the same.
We see therefore, among the top five chains, thereβs a smattering of incentives that would be worthwhile for users who already have funds on the chain, but wouldnβt necessarily draw in large capital.
However, a few of the longer tail chains might actually have a couple of rewards that could draw in money.
Gnosis chain is presently yielding about 12% unboosted for 3pool, and as high as 30% if you have the veCRV. Itβs not clear how long 3pool would be the target for this, but about $9MM is farming it while yield is good. Also keep an eye on TriCrypto here, which often tends to get good yield.
Kava has its own native rewards streaming to the chain, and at least a few apes have found the heavy yields. 10-15% yield on stablecoins is fairly enticing, and requires no veCRV to yield.
At the moment, sidechain yield still exists. Yet most of the best rates remain on mainnet, so we foresee a lot of DeFi activity to remain on Ethereum L1 for the near future.