Back to Basics: Single Farm
As part of our commitment to clarity and simplicity, deFarm introduces the "Back to Basics" series. It aims to break down complex deFarm’s products into easy-to-understand articles. Single Farm is the first spotlight in this series, offering users a comprehensive understanding of this unique feature of our growing ecosystem.
Understand DeFi Vaults
At the heart of deFarm lies a groundbreaking concept – DeFi Vaults, which we call Farms.
DeFi Vault is an asset management service that automatically optimizes the return on your contributed funds. Vaults aggregate user funds into pools, reducing overall transaction costs and optimizing returns for each pool participant.
Vaults come with varying levels of complexity and associated risk profiles. Those with lower risk typically employ straightforward strategies, such as single asset staking or utilizing LP tokens with auto compounding of farming rewards. On the other end of the spectrum, higher-risk Vaults engage in more intricate strategies involving multiple farms and protocols.
A DeFi vault is not necessarily a yield farming strategy. The basic strategy may differ, but the principles remain the same. An automated vault strategy maximizes the efficiency of your investment while keeping it simple.
A deFarm Vault (or Farm) is a unique DeFi Vault, that does not rely solely on computer programs but has a touch of human. Farms in deFarm have experts (Farm Managers/Creators) actively making decisions to help contributors’ funds grow bigger and faster. This active way of strategy is what sets de.Farm's farms apart from vaults of other platforms.
And to clarify, a Farm is a non-custodial vault. This means that Farm Managers do not have access to the assets within the Farm. Their role is limited to executing investment actions using permitted dApps and smart contracts to manage the Farm effectively. Importantly, they cannot transfer these assets out of the Farm to another address.
As part of our first development phase, we proudly unveiled two distinct types of farms: the Single Farm and the Seasonal Farm. To ensure our users have a complete understanding of these products, we have created the "Back to Basics" series which breaks down each farm type in detail.
Understand Single Farm
Single Farm is a unique DeFi vault on deFarm that focuses on a single trading idea. It enables users to create or co-invest in a Single Trade Vault.
More specifically, Single Farms allow you to provide liquidity for on-chain trading setups proposed by individual traders, who are typically experienced. The Farm creators (we called Farm Managers) earn a share of the farm’s profit.
Anyone can create a Farm out of their own idea, however, only the most reasonable idea will attract the most investors. The Farm Manager is only rewarded when the Farm is in-the-money, so they aren’t incentivized to trade irresponsibly.
Think of Single Farm as a special plot of land in the crypto world, where farmers grow only one type of crop during a specific season. Investors can choose to invest in the farm of their choice and earn a share of its profits (when the season ends).
How it works?
First, the manager creates a Single Farm from their own prediction of the movement of a token, including direction, leverage, entry price, target price, and stop loss.
After its creation, the Single Farm entered the fundraising phase. After this phase, the Farm will enter the trading phase, which is managed by the Farm Creator (if there is no fund after the raising period, the farm is canceled).
After the trading is done, usually when it hits the Take Profit order or the Stop Loss order, the Farm is closed. Then, the Farm Creator can earn a share of the Farm’s profit.
And just as anyone can be a Farm Manager, anyone can be a Farm investor. By investing in a Single Farm, you get a portion of the Farm’s P&L. With Single Farm, you can only deposit in the Fund Raising period, and withdraw after the Farm is done trading. Of course, each Farm comes with its own risks and rewards, and you should assess the Farm’s strategy and the performance of the Manager before choosing to invest.
Since each Single Farm only focuses on one trade, it reduces risks for investors as their capital is not spread across multiple trades. Investors gain access to unique trading opportunities proposed by expert Farm Managers. They can diversify their investments by funding multiple Single farms with different strategies.
Meanwhile, Farm Managers can build their reputation by consistently generating good returns for investors. Single Farm creates a win-win situation for both investors and managers. Investors stand to gain higher returns with fewer risks, while managers receive performance-based fees and more funding for their ideas. The platform also promotes transparency as all trades and returns are recorded on-chain.
Single Farm encapsulates the essence of deFarm's commitment to simplicity and transparency. It is designed to minimize risks for investors and maximize returns for managers. It operates transparently, every step is fully on-chain, carried out via smart-contract, and in a non-custodial style.
Single Farm is now live on the deFarm testnet. If you’re interested in testing out your own trading strategy or being a DeFi investor, check out https://testnet.de.farm.
That’s it for today’s topic. Stay tuned for the next segment of our "Back to Basics" series, where we'll explore the Seasonal Farm and unveil more layers of deFarm's exciting ecosystem.