What is Farming-As-a-Service (FaaS)?
Learn more about emerging crypto "hedge funds" where anyone can participate
Dear Sunday Investors:
Welcome to this week’s edition March Madness Edition of the Sunday Investor! To our new members, the format of this weekly newsletter will be a deep-dive into one investment-topic. This week, we will be going into a new type of crypto protocol emerging in the market called farming-as-a-service where users invest in a FAAS protocol team to invest funds and be their “hedge fund” using investment strategies in DeFi, NFTs, and crypto trading while rewarding users with automatic dividends. More on this and a few protocols who are quickly rising in this space.
Read, enjoy and share with any friends. Let’s build wealth together.
Weekly Market Recap
Let’s dig into some of the most important events that happened in the markets in the last week:
The Federal Reserve raised interest rates for the first time since 2018 and signaled six more hikes this year in an effort to slow the fastest rise in inflation in four decade.
Stripe now supports crypto businesses: exchanges, on-ramps, wallets, and NFT marketplaces. Not just pay-ins but payouts, KYC and identity verification, fraud prevention, and lots more.
ConsenSys Plans to 'Redesign' MetaMask and Hire 600 New Employees
Zuckerberg Says NFTs Are Coming Soon to Instagram
Farming-As-A-Service
Yield farming is an investment strategy in decentralized finance or DeFi. It involves lending or staking your cryptocurrency coins or tokens to get rewards in the form of transaction fees or interest.
So what is Farming-As-A-Service?
FAAS allows anyone to participate in yield farming by outsourcing yield farming to a team of “professionals”.
Farming as a Service is one of the newest sectors in the DeFi space and it's starting to heat up as it takes the thinking and complexity out of chasing the highest yields in the DeFi market.
The best comparison to FAAS is a hedge fund. You give the hedge fund money, and they should (in theory) be able to outperform you and the overall market with a very active investment strategies in DeFi. FAAS is still in its infancy, but it is a very interesting concept that is starting to gain traction in the market.
All sounds very promising, but let’s learn more on how this works!
How Does it Work?
Before talking about how FAAS works, let’s dive into more on tokenomics of every FAAS protocol.
What does tokenomics mean?
“Tokenomics” has become a popular term in the last few years to describe the math and incentives governing crypto assets. It includes everything about the mechanics of how the asset works, as well as the psychological or behavioral forces that could affect its value long term.
Most FAAS protocols follow a general blueprint, but they each may have their own differentiators to set them apart from others. This overview below will give a grasp of how all of these protocols aim to work.
FAAS Tokenomics:
When Buying or Selling the FAAS Protocol Token, You Pay a Tax: A controversial part of FAAS is what when you initially buy or sell the tokens, there is a tax that you have to
FAAS Token’s All Have Treasury: Each FAAS protocol has a treasury that'll be put to work through farming, trading, and investing in early-stage projects/seed rounds for startups
FAAS Token Holders Get Paid Dividends: FAAS protocols all utilize a dividend model. Most protocols are also paying out their dividends in Ethereum rather than their native tokens which is beneficial for holders. Twitter:@poordefipenguin put some data together for us on who has issued dividends so far.
What is a dividend?
A dividend is a distribution of profits by a corporation or crypto team to its shareholders. When a corporation/team earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to shareholders.
Biggest Protocols in FAAS
MultiChain Capital
Twitter: @mulchaincapital Coin Ticker: $MCC
MultiChain Capital was one of the first protocols that gained traction in the FAAS movement. They recently released a new feature where you purchase a “Node” and receive varying benefits based on the node you buy:
With $MCC and any FAAS protocol, you are able to view all of their investments in real-time providing direct clarity into what DeFi protocols are earning you (and the rest of the investors/node holders yield. Let’s take a look into what the MultiChain team is invested in below or in the link here.
Reimagined Finance
Twitter: @ReimaginedFi Coin Ticker: $ReFi
They have the 2nd largest treasury in the growing FAAS subsector and are known for their overall transparency with the community. The DAO voted to get RID of the reflections recently. The 12% tax goes straight to the treasury. They have paid out 1500+ ETH in dividends so far.
More on information on their holders, investments, and dividends already paid on their website here:
All Coins Yield Capital
Twitter: @ACYCapital Coin Ticker: $ACYC
All Coins Yield Capital works in the same way as the first two protocols mentioned, but they utilize strategies in everything from cryptocurrency trading, NFT trading, and DeFi yield farming to get its holders rewards. Whenever someone buys or sells $ACYC, there is a 10% tax which is automatically rewarded to the rest of the current holders.
More on ACYC on their website here:
Risks of Farming-As-A-Service
We have discussed the potential benefits of having a team of yield farming/crypto investing experts be your personal “hedge fund” with these FAAS protocols that are popping up in the market, but now lets discuss the risk factors we need to take into account when deciding whether or not to think about investing.
You are taxed on both buying and selling for any FAAS token: Since you are taxed 10%+ on the protocol to buy or to sell, your return on investment has to outperform the taxes + gas fees.
FAAS is growing and most protocols have small market caps: You could lose funds due to the slippage and gas fees when you're trying to sell your tokens back on the open market due to there being less volume/open market orders for the FAAS tokens on the market.
Teams/Head Yield Farmers could be anonymous and leave the protocol for other opportunities: The main advantage of these protocols are their investment teams expertise in DeFi/yield farming. If part of the team leaves or makes bad decisions, this has a direct impact on your dividends.
FAAS is in its infancy: Most hedge funds have 20+ years of historical returns for investors peace of mind, FAAS protocols may have only a few months of historical returns.
When thinking about investing in FAAS protocols or any crypto, you have to think about what your risk tolerance is and if this is right for you. FAAS is definitely a higher risk then investing in a DeFi protocol like Curve or Aave yourself due to all of the reasons above, but the rewards could also be substantial as well.
Chart Of The Week:
20B Added To Stablecoin Market
The supply of the top 5 stablecoins has grown by $20B in 2022. USDC was responsible for the bulk of the growth, expanding $10B in supply, or half of the growth year-to-date.
Memes of the Week
Next Article
Will be keeping my eye out for new content to write about these next few weeks. Be sure to send in any questions directly to me or comment below on this post what you’d like me to write about or answer next!
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Not financial or tax advice. The content in this newsletter is for informational purposes only. Every investment and trading move involves risk. Do your own research when making a decision.