How Smart Yield Strategies are Taking DeFi to the Next Level
The DeFi space has witnessed remarkable growth of late, with the Total Value Locked (TVL) in its protocols doubling from $56 billion to $115 billion over the past 16 months. Needless to say, yield-chasing – the pursuit of high returns on staked capital – remains a key driver of the industry’s popularity.
Five short years ago, during the original DeFi Summer, agriculture-themed yield farms were everywhere you looked and “When Lambo?” was the eager rhetorical on everyone’s lips. While the potential for profit was very real, yield strategies have evolved greatly in the intervening period – and not just thanks to auto-compounding. Today, smart modular strategies powered by middleware DeFi aggregators and Layer-3 logic are taking center stage, addressing long-standing challenges like gas use inefficiency and lack of real-time optimization.
Middleware that connects services and protocols (yield generators, price oracles, bridges) streamlines automated allocation and risk management, empowering yield-chasers to manage positions across multiple dApps from a single platform. In short, the tech has never been better from the perspective of DeFi users.
Why DeFi Middleware Matters
In a blockchain context, middleware refers to software that facilitates communication between blockchains and external apps – in the process serving as a vital logic layer between users and core DeFi protocols.
Where yield strategies are concerned, it’s fair to say middleware is worth its weight in gold, allowing ‘farmers’ to manage complex positions through a single, user-friendly interface and eliminating the need to interact with dozens of different protocols.
In addition to reducing operational complexity and enhancing accessibility, middleware enables reactive strategy adjustments, ensures peak performance by integrating real-time market data, and slashes gas costs thanks to off-chain computation. Moreover, innovations like volatility-aware compounding, transaction bundling, and real-time rebalancing represent a major advancement since DeFi’s first major boom.
In short, middleware abstracts cross-chain complexity and takes financial management back to basics – at least from a UX point of view. Although what’s going on under the hood is pretty sophisticated, the user is spared the headache.
Middleware in Action
A great many middleware projects have come to the fore in recent years, promising to deliver advanced functionality and seamless UX in the realm of yield farming. We’ve certainly come a long way since farming here-today, gone-tomorrow governance tokens on dodgy-sounding ‘liquidity mining programs.’
Decentralized Layer-3 (L3) blockchain Orbs is a prime example of this evolution. Designed for advanced on-chain trading, this sophisticated middleware enhances both EVM and non-EVM smart contracts without requiring liquidity to move to a new chain, creating a decentralized backend that brings CeFi-tier execution to DeFi.
As well as its underlying infrastructure, Orbs is known for its dLIMIT and dTWAP protocols which enable algorithmic trading on decentralized exchanges (DEXs) across eight blockchain networks. Among other benefits, dLIMIT and dTWAP lets users reduce slippage, access advanced order types, and break large orders into smaller trades for better execution. Orbs’ extensive list of DeFi partners include OTC derivatives platform SYMMIO and Fantom DEX SpiritSwap.
Yearn’s V3 system, meanwhile, offers a decentralized suite of yield-generating products designed for flexibility and safety. Renowned for its audited vault infrastructure that lets anyone deploy or manage their very own vault, Yearn also has its own liquidity pool token, yETH, consisting of various Ethereum Liquid Staking Derivatives (LSTs). Recently, the project has elected to remove all protocol fees from its best-in-class V3 vaults to incentivize greater participation.
And then there’s Sommelier, a ‘dynamic DeFi strategy connoisseur’ built on the Cosmos SDK that offers market-adaptive vaults using off-chain execution logic. Boasting no fewer than 33 vaults and integrations with a slew of high-profile protocols (Aave, Uniswap, Compound, Morpho included), Sommelier promises robust risk mitigation through independently audited smart contracts and community-approved vaults.
DeFi’s UX Game-Changer
In a sense, middleware has transformed DeFi from an exciting but somewhat foreboding ecosystem populated by primitive tools into a polished, user-friendly domain where smart yield strategies call the tune.
By giving users new and old the opportunity to maximize gains while minimizing costs and complexity, middleware solutions make navigating the DeFi landscape with confidence a reality.