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Protocol Earnings and iFARM
The distribution of protocol fees to FARM-holding investors.
A key innovation of the
$FARMtoken is that it shares with staked holders any performance fee taken from any profit generated through Harvest's yield farming strategies. While each strategy may farm different assets, each has a performance fee that is used to recover operation expenses for the Harvest treasury and buy
$FARMon the open market, which is then distributed to those who stake
$FARMin the Protocol Earnings pool. To participate in the earnings pool, users must first obtain FARM by earning incentives for participating in Harvest's yield farming pools, or simply buying FARM directly on the open market. Then FARM must be staked in the auto-compounding Protocol Earnings pool.
The Protocol Earnings pool is a modified SNX style staking pool. Once FARM is purchased on the open market it is distributed pro rata to all those staked in the Protocol Earnings pool over a duration of 1 day, with each new reward added resetting the duration of the payout. As a result, the instantaneous reward rate for the pool fluctuates over the course of the day. For this reason, a 7-day average of the reward rate is displayed for this pool. The instantaneous rate can always be checked by reading the smart contract directly.
The interest-bearing FARM token, iFARM, is a deposit receipt token for FARM that is auto compounding in the Protocol Earnings pool. It can be obtained by selecting the "Use iFARM" box when depositing FARM.
iFARM utilizes the same vault architecture as Harvest's other vaults, colleting FARM from users and then depositing it in aggregate into the Protocol Earnings pool. The advantages of iFARM over FARM include:
- Lower gas costs to deposit FARM into the Protocol Earnings pool.
- A fungible and transferrable receipt token, iFARM, allowing compounding shares to be transferred between addresses without first unstaking FARM.
- Composability of the iFARM token allows compounding shares to be utilized in external opportunities, such as providing liquidity for iFARM on Matic, or futurization of yield at Spectra.Finance.
Note: because there is typically some un-invested FARM in the vault, the iFARM vault has a slightly lower rate of return than FARM staked directly. Due to the high adoption rate of iFARM, the discrepancy is typically extremely small (<0.1% at the time of writing).
In addition, withdraws of FARM in amounts greater than the un-invested FARM held in the vault may require more gas than withdrawing from the pool directly.