“An investment in knowledge pays the best interest”
Education is key to determine investment opportunities. Understanding the market, its mechanisms and its tools is necessary before making any investment decisions. For that reason, Benjamin Franklin used to say that “an investment in knowledge pays the best interest”.
Please remember: this digest is shared for information purposes only and should not be treated as an endorsement of any projects included. Always do your own research. With this guide, you will learn how to yield CLAP token on Minswap through the Farming process.
What is Minswap?
Decentralized finance (DeFi) and exchanges platforms have developed Automated Market-Making (AMM) concept, making individuals new financial actors. These new economic players, called Liquidity Providers (LPs), act as a pool of funds becoming a new AMM entity.
Minswap is a Decentralized Exchange (DEX) platform which aims at enabling token pairs trading on Cardano Blockchain through an “innovative multi-model asset pool”.
A partnership with Cardashift?
Minswap and Cardashift put the community at the heart of blockchain technology and its future developments. On the one hand, individuals are a significant resource that will be necessary to train and board in the community in order to make them actors of this revolutionary ecosystem. On the other hand, individuals could benefit from the community-based model. Indeed, the lack of participative initiatives has led to a democratic crisis in many societies. Looking for a democratic governance model will lead to a Pareto optimum by giving power to individuals and therefore maximizing the global welfare.
Cardashift tries to magnify the individuals and conjugate their citizen and investor parts. Working with Minswap could be a way to expand the Cardashift family and encourage CLAP adoption.
What is yield farming?
As an agricultural holding activity, yield farming requires knowledge, commitment, dedication and attention.
It has been developed in DeFi to incentivize liquidity and the use of the platforms by rewarding users in tokens. It involves three distinct entities:
- Farmers or Liquidity Providers: they will provide liquidity in pairs pools and will receive LP Tokens. They support the development of the ecosystem by providing capital. They will be rewarded according to the proportion of liquidity they provided.
- Liquidity Pools: They will provide LP Token to the farmers in exchange for their liquidity.
- Traders: Through the liquidity provided by the farmers, traders will be able to exchange their crypto assets.
All investments present risks, and it is not different with Yield Farming:
- Smart contract failures: There is always a chance that a smart contract could either fail or have some exploitable imperfection that could lead to a loss of funds. Checking if the code has been audited by an independent company could be a way to mitigate this risk. However, even if the code has been audited, there are still risks. Indeed, on Marche 24th, the Minswap team was notified of “a critical vulnerability that would allow someone to drain all the liquidity in the smart contract”. Despite the fact that this issue was handled, make sure you are aware of the risks related to such investments.
- Impermanent loss: When a liquidity provider enters into a pool, they provide an even amount of two separate assets. Several platforms require a 50–50 distribution of these assets in terms of their value. So if the price of one asset is rising, the pool will sell this asset, and you will get less of it. Rewards via fees and governance tokens will counter this issue of impermanent loss.
- Rug pulling: Creating a brand new token and providing liquidity for it on a platform (DEX) could be risky if no project analysis has been done.
To provide liquidity and start your Yield Farming, you will have to install on your navigator a compatible wallet. You can find below a list of wallets supported by Minswap DEX.
Here, you can read a tutorial explaining how you can create your personal wallet.
To start farming activities, you are going to need LP Tokens. We have to notice that farms only accept their own exact LP Token. In our case, if you want to get into the ADA-CLAP farm, you will need ADA-CLAP LP Tokens.
ADA-CLAP LP Tokens
Providing liquidity is central to the Minswap Farming mechanism. You can provide liquidity of a token pair you may have and receive trading fees + LP tokens you can stake in the farms.
• Provide pair liquidity
1. Visit the Minswap landing page and click on the Pool button.
2. Select the pair you are interested in. Here, we want to focus on ADA-CLAP pair. Click on the “Add Liquidity” Button.
3 . Once you are in the ADA-CLAP Liquidity pool, feel free to enter the amount of one token in the platform. The other token should be filled and calculated automatically. Both tokens will need to have enough balance in order to make the transaction possible. For example, in our case, we decided to put 9 ADA in the pool. We will, therefore, require 155.39 CLAP Token. Click on “Add Liquidity”.
Please note that any deposit or withdrawal transaction will automatically be attached with a 2 ADA fee and approximately 1.5 ADA will be returned.
If you do not have enough balance, you will need to buy or swap some tokens. Go to the Trade platform and trade the tokens you want.
Minswap proposes an interesting way to mitigate the insufficient balance problem. To avoid this issue, you can use the “Zap” process. Basically, you will be able to provide liquidity with only one token. Please note that it can cause a small amount of slippage.
Enter the amount of token you want to convert into LP Tokens, and press the Zap Button, by making sure you have enough balance of ADA to cover the 2 ADA fee.
4. Make the transaction
Once the “Add Liquidity” button is pressed, sign the transaction through your wallet. At the end, you will receive a notification showing that the transaction has been submitted.
Here, you will find an example from Nami Wallet.
You will be able to see your transaction and its details in the “Orders” Section.
Let the farming begins
- Farms page
Go to the farms page and select the farm you are interested in. In our case, we want to focus on ADA-CLAP farm. Make sure you have ADA-CLAP LP Token in your wallet.
Click on the “Stake” button to begin the process.
2. Start the process
Once you have clicked on it, a window will open. You will be able to select the amount of LP tokens you want to stake.
Make sure you validate the transaction through your wallet.
3. Display your data
You will be able to see the amount of token you deposited in the farm, and your harvest by reaching again the Farm page, and select the farm.
Have a look at our figures:
- We staked 525 412 ADA-CLAP LP Tokens
- We earned 0.00113 MIN Token
4. Harvest your rewards
Once you decide to harvest your tokens rewards, go to the Farm page and select the farm you are interested in.
Click on the “Harvest” button and follow the usual procedure.
5. Add or remove liquidity?
Go to the farm you are interested in and press the “Withdraw” if you want to remove LP tokens from the farm, or the “Stake” button if you decide to add more LP tokens.
A window will open, where you will be able to choose the amount of LP tokens you want to withdraw or stake, depending on the button you pressed.
- How often should I harvest my reward?
It is up to you. You can harvest your rewards whenever you want, but please keep in mind that there is a small fee for harvesting.
It might be more interesting to let your harvest grow to minimize the fees you will pay.
2. Return on Investment
The return on your investment in Minswap Farms is based on:
- Farm allocation: Here, you can find information on this allocation and what it implies. Basically, our ADA-CLAP farm is defined as a “Kitty farm”. It gives 3 points to the pool, meaning that 3% of the 2 million daily MIN rewards will be allocated to the liquidity providers.
- Annual Percentage Rate (APR): The APR gives you an overall idea of the interests you will perceive in one year. This figure will depend on the number of liquidity providers and the value of the native MIN token.
The Cardashift family aims at providing CLAP liquidity. To this end, in the following months, we plan to develop several partnerships with DeX to clear access to our token and expand our family circle.
We want to propose a simple and secure solution that would allow individuals to participate in our project. Increasing CLAP adoption through bridge and CeX listings will be the next steps of our journey.