The ongoing DeFi craze shows no signs of slowing down as the total value locked (TVL) in different protocols continues to increase by the day.
As CryptoPotato reported earlier today, SushiSwap, the protocol that is attempting to fork the world’s leading decentralized exchange Uniswap by introducing a liquidity reward token called SUSHI, topped $1.2 billion in TVL.
Many are taking advantage of the high APY and are staking their tokens to earn SUSHI, as the token’s price continues to appreciate. One user took it to Twitter to share that he’s making roughly around $240,000 per day, farming SUSHI. Here’s how he’s doing it.
$240,000 Per Day Farming SUSHI
A user going by the handle HighStakesCap, took it to Twitter to explain how he’s earning $240,000 per day farming SUSHI.
He said that he’s using 7,000 ETH worth of SUSHI and that he’s earning $56 every 20 seconds. In other words, he’s using almost $3.3 million in SUSHI to farm the liquidity pool where he has to stake the same amount worth of ETH in Uniswap’s SUSHI-ETH pool for which he will receive SUSHI-ETH UNI-V2 LP tokens. He then has to stake these in SushiSwap’s protocol and earn an APY of around 2,202% at the time of this writing.
I’m farming 7000 ETH worth of $SUSHI and win $56 every 20 sec, $240k / day
I won’t do it for long, I don’t like this kind of risk but I’m ok with it bc I won a lot these days
Don’t do it if you’re not comfortable to lose it all
I will certainly sell all my SUSHI around $10
— High Stakes Capital (@HighStakesCap) August 31, 2020
What Are The Risks?
In this particular scenario, there are at least two types of risks that the user should be concerned about. Both of these could essentially erase his capital, hence why he recommends not to do it “if you’re not comfortable to lose it all.”
Risks associated with the smart contract could result in complete loss of the capital. SushiSwap’s code is not audited.
According to the official announcement:
… the MasterChef contract for farming is unaudited, but it’s simple enough for most Solidity developers to understand. Please read through the contract before putting your LP tokens at stake! Everything is in BETA, please use at your own risk.
Earlier in August, another financial experiment came to light, known as YAM Finance. The protocol, much like SushiSwap, attracted almost $600 million in less than 24 hours since it was introduced. It only took a day for the developers to discover a critical code error in its rebasing mechanism, which led to the minting of so many new tokens that the protocol became impossible to govern.
Apart from this, in the particular scenario that this user gave, there’s a serious risk of impermanent loss. Since he’s staking two volatile cryptocurrencies – ETH and SUSHI, if their dollar value decreases while he’s staking them, he might lose more money than he’s able to farm.
Of course, it also depends on his investment strategy. If the user is holding ETH as a long-term investment, than the abovementioned impermanent loss risk would be reduced in half, and he’d only have to be concerned about the price of the SUSHI token.
In any case, this is a perilous endeavor, and given the skyrocketing ETH fees, it’s not practically feasible to do it with small capital.
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