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FRAX-USDC stablecoin farm on SushiSwap is offering 20%+ APR with no impermanent loss!

What is a stablecoin, what is impermanent loss and more ..

Julius Caesar

Dec 8, 2021

Disclosure: Members of our team are participating in the following farms. This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token or participate in any farms. This content is for informational purposes only and you should not make decisions based solely on it. This is not investment advice. Please exercise extreme caution if you intend to participate in these opportunities.

Note: The yield mentioned in this article may consist of both native & protocol rewards. Yield breakdowns can be found in the protocol dashboard.

What is a stablecoin?
- What is USDC?
- What is FRAX?
What is impermanent loss?
Why should you ape into the FRAX-USDC pool on SushiSwap?
How to participate?

What is a stablecoin?

A stablecoin is a cryptocurrency pegged to a reserve fiat currency like US Dollar or Euro. Stablecoins behave like normal tokens on blockchain networks — ERC20 on Moonriver, substrate native tokens on Polkadot, Acala, etc. Hence, they have wide-ranging use cases in Decentralized Finance.

What is USDC?

The USDC stablecoin is backed by dollar-denominated assets of at least equal fair value to the USDC in circulation in segregated accounts with US regulated financial institutions. These accounts are verified every month by an independent accounting firm.

What is FRAX?

FRAX is a fractional-algorithmic stablecoin pegged to the US Dollar. Its price is stabilised in part by being backed by collateral (like the case with USDC) and in part by arbitrage. You can read more about its price stability mechanism here.

What is impermanent loss?

Impermanent loss happens when you provide liquidity to a decentralized exchange liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger this change is, the more you are exposed to impermanent loss.

In this case, the loss means less dollar value at the time of withdrawal than at the time of deposit.

If you provide liquidity to a pool where price change is negligible, your risk of impermanent loss is minimal.

Since, pools of wrapped tokens (like WMOVR-MOVR) and stablecoin pools (like FRAX-USDC) experience little to no price movement, the risk of impermanent loss is also little to none.

Why should you ape into the FRAX-USDC pool on SushiSwap?

Both FRAX and USDC are stablecoins pegged at $1. Hence, there’s no risk of impermanent loss if you provide liquidity to this pool. It provides a 20% annualized return with no risk of price change of the underlying asset (other than your standard smart contract and protocol risks, of course).

You can use this pool to hedge the risk of your overall portfolio or use it as a place to hold your funds while you look for the next big opportunity to bet your bags on. All while earning more than twice the average return of the S&P 500!

How to participate?

Go to the Farm page on the SushiSwap app and connect your wallet.
Make sure you are on the Moonriver network.
Click on the FRAX/USDC Pool and enter the deposit amount.

NOTE: You may need to Approve the app’s smart contract to use FRAX or USDC if you are using them for the first time on SushiSwap.
Click on Confirm Adding Liquidity.
Your FRAX and USDC have been added to the liquidity pool.

To supercharge our yield, let’s stake the LP tokens received — in lieu of providing liquidity — to earn additional rewards in SUSHI and MOVR.
Switch to the Staking tab and enter the amount you want to deposit (we’re depositing it all using the “max“ button).
Approve the use of LP tokens by the app’s smart contract.
Click on Confirm Deposit to stake your LP tokens.
🎉 Congratulations! You have successfully staked your FRAX-USDC LP tokens on SushiSwap.
Go to Your Farms tab on the sidebar to see your farms. You can see your holdings and pending rewards there.
To redeem your FRAX and USDC, simply unstake your LP tokens and remove liquidity.