By now you should know what Harvest Finance is. But, on the oft chance you don't, Harvest Finance "... is an international cooperative of humble farmers pooling resources together in order to earn DeFi yields. When farmers deposit, Harvest automatically farms the highest yields with these deposits using the latest farming techniques" (https://harvest.finance/faq). However, many of you have probably never heard of APWine Finance. This protocol allows an investor to speculate on the future progression of the yield generated by different DeFi protocols, thereby allowing the investor to hedge risk on passive revenue by converting it into futures (see, https://apwine.fi). Basically put, the protocol allows an investor to trade unrealized yield on a yield bearing token.
Recently, following Harvest's investment of $50,000 USDC (for APWine tokens valued at $0.30/token vesting over a period of two years), APWine has listed the iFARM token for leverage in the beta version of APWine's protocol. Harvest and AP Wine will discuss future strategies and integrations across both platforms as the collaboration moves ahead.
So, how does it work (101)? An investor deposits a yield bearing token such as iFARM with APWine and receive Future Yield Tokens (FYT) in return. When the deposit is made the investor selects the time period and amount of yield bearing tokens to be locked. The FYT generated by the lockup is in a ratio of 1:1 with the underlying token. The FYT token issued is valued by how much yield the underlying token is to earn during the chosen lock time as well as how much risk the investor will tolerate based on the maturity date. The FYT tokens generated are available to be sold immediately on the open market allowing the investor to realize future yield upon the sale.
Aside from the availability to realize future yield, there are several other benefits inherent by using this protocol. Sellers in the system can hedge against possible downswings in the market. Likewise, sellers may utilize the realized profit to purchase additional assets for deposit and leverage. Buyers in the system may speculate whether the APYs will be higher than expected increasing their return through the purchase of cheap yield. And finally, for the benefit of the smaller farmer, the smaller farmer may now participate in rewards from the platform absent the high gas fees that would be associated with having to independently deal with both platforms to take part.
I am merely an ordinary small investor who likes to share what I've learned and found to be interesting. Please take a few minutes and check out my other published articles. While I am very bullish on the prospects of Harvest Finance and write about it often, I am not in any way a financial advisor and as such, do your own research before investing. If you enjoyed this article please like it, comment and/or tip. Feedback is always welcome here.