Three DEFI traps to watch out for...

I've done O.K. out of DEFI on Binance Smart Chain over the last couple of months, but it's not been all happy dayz and moon-profits all the way.

I have fallen foul of three DEFI traps along the way....

  1. The classic Impermanent loss
  2. The overnight drastic reduction in APY
  3. The drastic fall in value of the platform token.

I've had a couple of losses along the way, for example...

Losing through Impermanent Loss

I don't even want to calculate how much I'm down from having my ETH drained by being in the WLEO-ETH pool - I think it's something like $1000, even factoring in the WLEO 'geyser' pay-outs, which hardly gushed when you factor in the loss of ETH, drained and replaced with WLEO which has declined in value while the former has soared in the last couple of months.

And because I don't learn my lessons easily, the same happened all over again with the BLEO-BNB pool, not as bad in terms of losses as I swapped my bleo for BNB on the way up.

LESSON: Don't pool yer mother tokens (ETH/ BNB) - hodl them - which is what I'm doing (mostly) with my RUNE. I'm also now completely out of the WLEO-ETH pool and mostly out of the BNB-bleo pool.

The overnight reduction in APY

I put about a $1000 into the SXP-BUSD pool on Panda Swap via the swamp finance aggregator a couple of weeks back when the APY was 200 odd percent.

When I checked a few days ago, the APY was down to 10% (currently 12%). I pulled out, which was painful given the relatively high gas fee for entry, I don't think I even made that back due to the minimal time I spent in the pool.

Screenshot 20210504 at 23.45.32.png

LESSON: Be very wary of high APYs on 'fringe' pairs and check the APYs frequently and be prepared to get out if they drop!

The drastic fall in value of the platform token.

This happened with one of my punts - on NEON - here I just bought (thankfully only a little) some NEON at I think $0.70 and just dumped it in a den at 300% APY, but the price has since dropped 50% to around $0.30.

Screenshot 20210504 at 23.48.03.png

SO the return might be good, but I'll have to leave it in that Den for a few months to make my money back if the price stays the same.

LESSON: Only punt small amounts of yer funds into degenerate DEFI platforms.

Final thoughts

There are some good profits to made in DEFI world, but you need to be careful of the traps you can fall into that result in you making a loss in relative terms compared to what you would have made just holding.

Ultimate Lesson: pool stables to avoid IL, stick to DEFI platforms you trust with 90% of your stake (like Cub, and BEPSWAP for me ATM) and only ever punt 10% into degenerate DEFI!

Posted Using LeoFinance Beta


This is a great info that will help us to prevent ourselves from DeFI traps....thanks for sharing @revisesociology

Posted via

Hmm, now I'm a little worried about the CUB BNB farm. I plan on holding for quite a while though. Hope this isn't me writing this post next month.

Any advice now I am in pretty heavy?

Posted Using LeoFinance Beta

Any advice now I am in pretty heavy?

yeah if your in for a long time - just don't look at it. lol

That's up to you @whatsup, as far as I understand Impermanent loss if the price of BNB or CUB goes in one direction then you are okay. But if one goes down and the other goes up, you will see an impermanent loss. This means you will likely end up with more of one of the two paired tokens and less of the other one.

If you stay long enough and make a lot of CUBs and its price increases over time then you can counter it very easily. But it's a gamble. High risk for potentially high rewards.

This why putting your money in Stablecoin Farms like BUSD-USDT makes sense. Price fluctuations are minimal/negligible in those cases.

Posted Using LeoFinance Beta

Well I'd never advise anyone to do anything, but BNB has doubled in price since CUB started while CUB has steadily declined, so depending on when you pooled you could have less than half the amount of BNB you started with already if you pooled early.

For me, anything paired with BNB is a no-go now, as it doesn't seem to be coming down in price, except for Rune on BEP as I anticipate that and BNB both going up.

Posted Using LeoFinance Beta

I sort of breathed a sigh of relief when I read this. I've been thinking that maybe I should research defi outside LEO but have resisted since my gut was telling me they would take too much managing. I'm measuring my returns not only on size but also by how much of my time/energy they take. My goal is to eventually make enough income to take out my CGA allowance every year for as little time/effort as possible.

I do want to diversify outside of Hive though and have been researching simple staking returns elsewhere.

Thanks so much for the information in this article. It's really useful for the smaller players I think. 😊

One thing I was curious about . . . why do you prefer BEPSWAP over pancake swap at the moment?

Posted Using LeoFinance Beta

I'm measuring my returns not only on size but also by how much of my time/energy they take.

That's a great point. This is something I also value a lot and that's why I've been restricted to CubFinance for the moment.

Posted Using LeoFinance Beta


Posted Using LeoFinance Beta

Thank you for your engagement on this post, you have recieved ENGAGE tokens.

I've done OK out of Pancake TBH, but then I've got most of the cake i've bought/ earned in the cake pool, which is only Cake!

BEPSWAP - you have to pool everything with Rune - for most of March/ April Rune and everything I paired with increased, if both tokens increase, it's a win.

And you can asymmetrically pool - just add USDT and it converts half to Rune.

I pulled most of it out when Rune started proper increasing recently, now I've put some back in again.

And on Rune mainnet you can stake native assets, not the wrapped versions.

I haven't pooled too much Rune as I think it could well be the next BNB.

Posted Using LeoFinance Beta

Thanks for the additional information. It's all a bit labour intensive for me I think. Interesting to learn about though. 😊

Posted Using LeoFinance Beta

I think your advice is fairly sound. I don't know if I should continue to add to my bLEO/BNB pool in the future as it the value has decreased more than I earned in interest so far. Then again it has only been 2-3 days since I added to the LP.

I am debating about moving some into the CUB DEN to be safe.

Posted Using LeoFinance Beta

LESSON: Don't pool yer mother tokens (ETH/ BNB) - hodl them - which is what I'm doing (mostly) with my RUNE

Well, if you hold for long enough on Thorchain, pooling the mother tokens is not a bad idea as impermanent loss is paid back to LP’s that hold for at least 100days...

INteresting... I have some RUNE but still haven't tried to poll it. Maybe I should look into that

Posted Using LeoFinance Beta

Yep look into it quick

Posted Using LeoFinance Beta

What the actual fuck, for real? That somehow escaped me, I really need to do my research!

Posted Using LeoFinance Beta

Lol glad to let you know

Posted Using LeoFinance Beta

Thank you so much @revisesociology for sharing your valuable experience. A lot of people don't understand and get into DeFi out of FOMO.

This is what happened to me. Impermanent loss is quite real and in fact the terminology is misleading. Because prices are fluctuating daily, so it's always permanent. You lose the value of one token inside the LP pair. I don't fully understand it so I don't how to counter it and save yourself from losing money.

This is the reason why I like Single Token Staking more than LP Staking. CUB Den is my favorite. ;)

Posted Using LeoFinance Beta

Indeed, I'm in DEFI mainly for the stable pools these days!

Posted Using LeoFinance Beta

To be honest, I find engaging in DeFi to be much more trouble than it's worth.

Posted Using LeoFinance Beta

It can be troublesome. CubFinance is a good way to start though because I found it easier than most platforms and it's also something we can trust.

I used to think I'd never get in DeFi but I'm happy with CubFinance for now.

Posted Using LeoFinance Beta

knowing the team behind it - there's a lot going for it!

Posted Using LeoFinance Beta

If you stake stables, there's little to think about TBH!

Posted Using LeoFinance Beta

This is what I called sound advice.
You need to stay consistent and make
The right move at the right time.
The analytic should help that way
It is hard to be in too many places hoping to get a quick return.

Posted Using LeoFinance Beta

I know what you mean, having more in fewer places - there's something to be said for that, but I do like to diversify with a small percentage of the profit!

Posted Using LeoFinance Beta

Only gamble with munies you can afford to lose?
I haven't heard many 'I traded my way to riches' stories compared to the number of trading stories I've heard overall.
Most wish they had just held, and that has been my experience, mostly, too.

Until we start getting stories in the crypto press we are still early to the game.

Have you looked at the diesel pools on hive-engine, they look pretty safe, presuming we don't get hit by lightning.

I think I might be in one of the diesel pools, only as a test though, TBH I haven't really explored the options, I should do!

I think for DEFI single token vaults are going to become more of a thing for me.

Posted Using LeoFinance Beta

Yeah, 100% apr is hard to turn down, especially when you still hold the keys.
I have my cub on standby for the moonshot.
I hope it isn't my kids that get to spend it.

I'm still restricted to CubFinance when it comes to DeFi and I'll probably stay there for the time being. I just love the project and I really trust that they will not rug-pull us or anything like that.

Thanks for sharing your lessons. DeFi is quite a new universe to many of us and it's great to learn from others.

Posted Using LeoFinance Beta

I feel pretty secure in Cub as I know the team!

Posted Using LeoFinance Beta

This is very good advice. Impermanent loss has been covered and explained a lot but not many have mentioned the sudden drops in APY.

Any idea what triggers the drop? I couldn't find any good explanation for it.

Posted via

That's a good question indeed. I don't really understand all the reasons behind the drop and would be interesting to learn that.

Posted Using LeoFinance Beta

I've seen some platforms explain it as logic embedded in the code which i find to be quite sneaky. Like which ordinary user is going to study the code and spot an issue with rates that drop drastically?

At least with points 1 and 3, you can do some planning in advance.

Posted via

Like which ordinary user is going to study the code and spot an issue with rates that drop drastically?

That's true... I wouldn't even know where to start...

I've been asking around about this APR thing but it looks like a lot of people are confused by it too

Posted Using LeoFinance Beta

all good traps to know about; I think the BNB-CAKE pool, however, is fairly resistant to impermanent loss. If you check out the chart they are very closely linked (due to their interconnectedness with defi projects).

Yes funny you should mention that I was thinking that pool MIGHT be worth a small-in!

Posted Using LeoFinance Beta

Those last two just happened to me the other day. Thankfully I wasn't in too far, so I didn't really lose too much. It could have been much worse if I had went gangbusters on it!

Posted Using LeoFinance Beta

I hear you on the IP, Hot rekt a couple times and now I mostly stay in stable coins.

The drop in APY is a killer for coins that have deposit fees. So that is definitely one to watch for

There are all sorts of traps out there!

Posted Using LeoFinance Beta

Didn't really understand this, but I feel this will be valuable to me one day when I finally find out what Defi is and how I can get into it.



You should have a little practice with Cub, it's a good place to start!

Posted Using LeoFinance Beta

perfect examples of the DeFi learning curve pitfalls.. Valuable info for those just getting started in the wonderful world of DeFi!

Posted Using LeoFinance Beta

Your post was promoted by @finguru