How to degen farm on Polygon

This article assumes you already have the basics of Defi farming on Polygon and how to move your funds onto and off the Polygon (FKA Matic / ETH L2 network).

It is not positioned for beginners.

And disclaimer: Whatever I write here is not Investment Advice, DYOR (do your own research)

Discovering new Defi projects

For new farm launches on Polygon one of the best places to look is Vfat.tools - navigate to the Polygon section and you can see practically every project that is launched. The Polygon Chads group has anonymous tips for prelaunched projects. And of course any of the existing Polygon telegram community groups, though they generally frown on promoting other projects than their own inside their chat groups.

Generally these 'grassroots' community sources have more recent information than anything on twitter or reddit.

And if you don't already have your toolkit, take a look at this list.

Case study: Goldenbull

Referral link to project: https://farms.goldenbull.finance/?ref=0kOo77rQn00654oo78nS2R1O9p40p14Qs8Sp1r9oR9

(Full disclosure, you are supporting me to author these articles by using my referral links. you lose nothing, the project simply mints more natives)

Now in true Degen style, I will attempt to document farming this new project realtime and getting to 1X as fast as possible as mentioned in the previous article.

A Basic strategy to degen:

1. try to enter new projects with 0 deposit fees (often LP pairs)

2. Attempt to use non-native assets to farm the native token

3. DO NOT buy native token if you can help it- most of the time pre-launch native prices will be absolutely unrealistic. e.g.: 40,000. If you really have to, do something like 5 usd worth. If you MUST, as seed.

4. once you get the native from farming, dump it into a stable IMMEDIATELY (using swaps) do not try to compound until you are confident the price is stabilising, because you would just be compounding tokens that are worth less and less.

5. Once you 1x take out your principal then do whatever you want

This 19 minute long useful video guide for polygon farming by Taiki Maeda is also worth watching and it recaps alot of points written in my previous primer article. they use Polyfi as an example.

Background

I have been tracking GBULL since its announcement, it started at $40 from speculation on their community telegram, up to a peak of $130 usd value on the eve of launch day 5 june 2021 and since launch at 12 noon SGT, it has sank from that value to $99 to $80 to $65 (at the time of this article)

I had approximately $14 usd worth of BULL native tokens from Polybull which, thanks to the nice initiative of the Developers to help old investors have pools with zero fee deposits on Goldenbull. But this is leftover profits from when I degenned the project last time. Normally I would NEVER buy into a new native token from a defi farm.

Three of the factors I considered was:

• First, the track record of the Admin (Walter the Bull: @BullChris) - who launched the Polybull project, and gave old investors a chance to recover from their rekt BULL native holdings.

• Secondly, the project has a Techrate Audit (which is the sketchiest of audits, however its still better than none),

• Thirdly there is a 9M TVL which I had vetted using the projects addresses.

Other factors I considered was that there is a timelock on non native stakes which WOULD slow down dumping of the native token but not completely. The native pools/farms has a shorter harvest lock of 2 hours and 6 hours, which would give avenues for those who directly bought the native to dump out, so at most this mechanism would slow down the price erosion say.... 20%.

to begin, I staked two sets of assets:

BULL and BULL-wmatic LP

total value was $14 usd

(at the time of staking at 12 noon, 5 june 2021 was 14 USDC, this value has risen at the time of this article because the price of the legacy BULL token pumped due to the launch of Goldenbull)

Note: If I did not possess any BULL my choices would be to enter via the single staking pools QUICK and MATIC. There isn't any fee-less non-native LP pairs.

Take note that from this assessment in the image below does present that there's a $35.33 usd gain per day from a single $18.72 assessment, but this DOES assume that the APR stays the same which is also calculated from the fluctuating token price.

Exhibit from Vfat.tools - 8.35 Wmatic-bull was staked (now its worth $18.72)

The bull single staking pool was displaying Nan% on vfat due to the traffic, so it was pointless to do a screen shot. For the record, I staked 41.46 bull worth 0.45 USD/BULL at the time. ($18.66)

This means my principal at the time of entry is $37.37 USD

Exhibit: Initial Stakes

The stable price of BULL (The native token from the same developers in their previous project) went to $14. I am going to assume that this is probably where the stability will go to. This is a huge gut feel move on my part, no one can predict the future price of ANY native token, but a reasonable assumption is that it will go down from the hyped up prelaunch price. In the case of Golden bull, the same developers had a predecessor project, Polybull. We are also talking about largely the same community with some new entrants. So its the closest thing we have to a valid comparison apple to apple.

To make this assessment let's use the Impermanence loss calculator

For the sake of this example, I have

paired $4.67 USDC with the equivalent amount of GBULL which was 0.03 GBULL which I farmed out of the initial $37.37 USD value principal at the time. USDC is pegged to USD so its always worth $1 (small fluctuations in the peg by cents, but for simplicity let's disregard this). We ALSO have to take into account the potential for IL, so let's multiply $37.37 by 1.2651 and add 4.67 for bringing additional external usdc to form this LP.

This means my principal has increased to 51.94 USD.

My projected principal capital downside for this pair is 26.51% (an estimate at best) vs the potential gains from farming this new native token which is expected to slide south pricewise given that this is a typical new farm launch.

Exhibit - 1345 hours 5 june 2021. Staked 4.67 USDC + 0.03 GBULL - in seconds thanks to the high APR, 0.003 GBULL was farmed. which was worth $0.195 USD at this time.

Now what does VFAT say about my current GBULL pair stake?

Remember that with first day degen plays on largely unproven projects we are dealing with a native token that is rapidly declining in price, and some become useless (e.g.: Polyfox - no liquidity, polybuttefly- rugged) or a fraction of its starting value (e.g.: polywhale, Blackswap, Polylion). One method I use is to use an expected value. Let's say $14 USD (based on its predecessors performance and the price chart of BULL) and we take the daily estimate of native earnings of 0.42 of $27.49, divide by the current price of $65.78 and then multiply by our hypothetical expected price of $14: 27.49/65.78*14 = $5.85

Sanity check: its more likely to be a $5.85 daily income BEST CASE imho.

Exiting

So when should I exit this project? If the intent is to long term farm, then the approach is to leave principal in and compound all the native tokens back into their single staking native pools and/or LP pairs. However this exposes an investor to impermanence loss on LP pools and also (highly likely) depreciation of the Native token price.

Degenning is usually a short term strategy in which to farm as much native tokens as possible and dump them into stable coins quickly. A strategy even more dominant given the speed of transactions (and virtually nil cost) on Polygon.

exhibit: my GBULL to harvest at 1407 hours 5 june 2021

My objective is to harvest out 51.94 usd VALUE of natives and dump them to USDC in order to achieve 1X with my principal. I will subsequently, unstake up to breakeven. And leave remaining residual assets (staking them) to harvest pure profit ad infinitum.

Note: DYOR. Degen plays are high risk! This is not investment advice.

1440 hours 5 june 2021:

By the time i finished writing this article, the price of GBULL is already down to $53.96. I will make updates to this article to reflect the progress as it develops so that we can have a complete case study from the start to finish of a new day 1 defi launch and how to degen farm it.

1448 hours 5 june 2021:

GBULL is currently worth $52.463

I will update subsequent entries without screen shots for brevity. In fact, it might be easier to see if I presented it as a table.

In other cases, I would do some compounding, but the timelock and I'm doing this as a case study, so will leave all natives unharvested to illustrate the exit.