Lately I have found myself trying to learn a lot more about our DeFi ecosystem, and more so I have recently been searching for the best and of course most viable options that are cost efficient and also easy to use. Of course, to do this we have to explore the emerging Layer 2 ecosystem in order to dodge these increasingly high transaction fees. As we are all aware, the Polygon PoS chain is not a native Layer 2 protocol, however it is a very efficient Ethereum scaling solution none the less and I have covered why Polygon plays a very important role within our growing ecosystem on multiple occasions. And guess what, you can avoid high transaction costs required to use the Ethereum mainchain by using the Polygon network.
Today I am going to be giving a brief, yet informative overview about the Impermax protocol. What this protocol offers is a variety of various yield farms and opportunities for its users to earn a decent return by putting their own assets to work. Most notably though, and what I find most intriguing and useful about this protocol, is that Impermax actually offers its users quite high returns on their stable assets.
Now what this means is that users are either able to deposit LP tokens or stablecoins such as USDC or Dai into a liquidity pool and receive a reasonably high yield, therefore generating a passive income over a period of time. This is very important because over the last couple of months DeFi has been relatively quiet due to most users, as well as an increasing number of new people, coming into the industry in order to embrace the surging NFT craze. This basically causes APY’s offered by most DeFi protocols to fall lower due to less usage because of a lower than usual demand. That is not to say that DeFi is no longer useful, it just means that people are currently immersing themselves within this NFT mania at this point in time. These things operate in cycles just like regular markets so I suggest being patient and making yourself a plan that will set you up for the next DeFi surge.
Impermax – What Can I do with my Assets?
Firstly, I want to dive into a few numbers here, because the current APY’s offered by Impermax are easily some of the most appealing and eye watering opportunities that are currently available at the moment within the DeFi ecosystem. And before you get worried about the expensive gas fees that we all have been experiencing over the last few weeks, just remember that Impermax is available to use on the Polygon network, so essentially users will pay very little cost when interacting with the features of this protocol.
Now, the stablecoins that are currently supported on Impermax at the moment are USDC, USDT and Dai. Because these liquidity pools are in fact double sided, users would normally be worried about the risk regarding how accessible their funds will be in the future. Well, this is actually what makes this protocol so special, because some of these double sided pools are actually comprised of two different yet stable assets. Let’s look at the USDC/DAI pool as an example. Basically, this pool allows you either to deposit the required stable assets and borrow some funds against your assets. Alternatively, you are able to just simply provide liquidity and earn fees paid by borrowers to the protocol. What makes these stable pools so interesting and so simple is the fact that you have a much lower risk of experiencing some form of impermanent loss. This is because both of the required assets are stablecoins, and in this case, both assets are pegged to the US dollar therefore making it very unlikely that one asset will fall significantly lower than the other.
Single Sided Liquidity
Impermax also offers another feature known as single sided liquidity. This means that users only need to deposit one asset in order to take part in yield farming, therefore generating themselves a passive income for lending their funds to the protocol. These particular pools are actually quite brilliant due to the fact that two of these single sided pools are stable assets. Users can deposit either USDC or USDT into these pools. Currently, the USDC pool will accrue its users a 45.11% APY while the USDT will offer a 17.16% return. Either way, both of these pools are offering a very high return on your stable assets, a feat that not a lot of DeFi protocols are offering at the moment.
Staking IMX – The Native Impermax Token
Staking is another very interesting and often rewarding feature that is currently being offered by the Impermax protocol. Basically, Impermax withholds 20% of all the interest that is paid by borrowers to the protocol in return for them being able to borrow funds against their assets. The protocol then uses all of the gathered funds and uses it to purchase IMX tokens back from the market. What happens next is what makes this protocol so rewarding, once Impermax purchases these IMX tokens back, the protocol then distributes all of the gathered tokens among all of the staking providers proportionate to their share of the pool.
Wait, you mean that I can just stake my IMX tokens and earn even more IMX tokens as a reward by simply providing liquidity? Yes, that’s exactly right. This is just another one of many great features that the DeFi ecosystem can offer us. And more precisely, the Ethereum and Polygon ecosystems. What I think is just so brilliant about both staking and yield farming is that you still have the asset, even through the quitter periods of the market where token value slips a little and the APY’s come down for a while. So even when the market is quiet, you can still keep earning rewards that are generally paid out in the form of the protocols native token. And if it is a well performing protocol with a strong community behind it, more often than not the value of the token will go up sometime down the line.
As always in crypto and DeFi, nothing is certain, this is all new and it’s also quite risky. But if we keep building, keep innovating, keep stacking and keep paving the way to a new financial system, I am very confident that we will be rewarded for our efforts at some point in time. We’re changing the world people!
Thanks for reading everyone!
This newsletter is for educational purposes only and should never be considered as financial or investment advice