DeFi Saver - Advanced DeFi Management
2022 has been a rough year for crypto. The heavy money printing from 2020 to 2021 eventually had to come to an end with extensive inflation as a consequence.
In the bull run that followed after the Covid low, we saw the narratives changing from DeFi summer to NFTs, to Stablecoin winter, P2E/Metaverse to Web3. And of course the Layer 1 wars (that still continue) with the newly released Aptos. And I won't forget DeFi 2.0 with OHM, TIME, Daniele Sesta, Sifu, and Solid w/ Andre Cronje.
Today is a sponsored deep dive on DeFi Saver – and if you’re into Ethereum and Maker DAO this should be a well-known name. DeFi Saver has been operating live on the Ethereum mainnet since April 2019. It was one of the first dashboards to provide advanced features for protocols such as Maker, Compound, and Aave.
Disclaimer: This is not financial advice. I only write sponsored posts on companies that I personally can stand for. I’m not a financial advisor, so make sure you always DYOR (do your own research).
Intro to DeFi Saver
DeFi Saver is a wallet automation platform that allows users to leave their desks without worrying about how their on-chain positions are doing.
Okay, let’s break it down. Because what does that mean anyway?
Let’s say you take out a loan on Aave, Maker DAO, or Compound because you want to spend some money IRL. For example, let’s say you want to buy a used car for $5,000. In order to do so, you have to provide collateral. Your problem is that most of your money is tied to the blockchain.
However, instead of selling your assets, you could just provide eg. 10 $ETH as collateral, and then borrow $5,000 from one of the above-mentioned DeFi protocols. If the value of the tied-up assets goes lower, the user could get liquidated. That’s not an ideal situation, because we don’t want to lose our hard-earned $ETH tokens.
Meet DeFi Saver. Like many good stories in crypto, getting liquidated is where DeFi Saver’s story starts. The team was in Thailand on a hike in late 2018. One of the founders had a collateralized debt position trending towards liquidation while they were deep in the jungles surrounding Chiang Mai.
The challenge is when the underlying trends are lower in price. Then, you lose most of the collateral you gave for the loan as the protocol liquidates it. One way to avoid losing all your collateral is to pay back parts of the debt. DeFi Saver saw this as a problem and wanted to automate it. DeFi Saver allows users to automate how these positions (referred to as collateralized debt positions) are managed on-chain.
DeFi Saver has been operating live on the Ethereum mainnet since April 2019. DeFi Saver was one of the first dashboards to provide advanced features for protocols such as Maker, Compound, and Aave. The approach was to make complex protocol interactions simple with for example the signature Boost and Repay features offering 1-tx leverage and deleverage of crypto assets.
Afterward, the crew worked on automating the management of DeFi positions in these protocols with the desire of protecting user positions from liquidation when markets tumble.
It is also worth mentioning that DeFi Saver also worked on integrating other protocols and for example developed the Smart Savings feature with Compound, Fulcrum, and dYdX.
The service allowed a user to conveniently track and compare the yields available across the three protocols and transfer their funds between them in a single transaction, all through one dashboard. Currently, the most used Yield farming protocols are added instead, and users can find Yearn, Convex, mStable in the Smart Savings dashboard.
The protocol is steadily increasing its revenue (share of trading fees that goes to the protocol). Below you can see the daily cumulative revenue for the last year.
Automation
Let’s dive a little deeper into automation.
Automation is DeFi Saver’s mechanism to help you manage your collateralized debt positions (CDPs), providing you with automatic liquidation protection. Automation actively monitors users’ CDPs and leverages up or down depending on the price of the underlying collateral.
Why would anyone want automation enabled, and what’s the idea behind this?
Automation provides two important user benefits:
Automatic liquidation protection
Automated leverage management
In case of a massive continued appreciation of ETH value (which may make sense because we’re 70% down from ATH), you would be able to obtain additional chunks of ETH for your CDP, which would consequently be worth continuously more as the market kept moving up.
Example:
Let’s take a look at an example of using MakerDAO to leverage ETH. If you have 10 ETH and you open a CDP with ETH at $1,200, you can generate 6,000 DAI and use it to have 5 ETH more added to your CDP. You can do this in a single transaction using Boost. If ETH later reaches $2,000, you could pay back the 6,000 DAI debt with 3 ETH and walk away with 12 ETH where you initially had 10.
Now, if you set up Automation for that CDP, the system can keep adding more ETH as it goes up toward the suggested $2,000 price. It would generate more DAI to obtain more ETH at $1,400, $1,600, $1,800, etc, depending on your configuration.
Once enabled, Automation will generate DAI, buy more ETH, and add it to your CDP. This will increase your ETH exposure, decrease your DAI debt, and decrease your collateralization ratio. On the other hand, if your ratio drops below your configured minimum collateralization ratio, some of your collateral (ETH) is removed from the CDP, swapped for DAI, and used to pay back debt, increasing your collateralization ratio.
Users can sleep well at night, knowing that if there is a large liquidation event, their positions will be covered without incurring high liquidation fees.
Functionality
Okay, so we’ve gone through automation, but let’s look at all the other opportunities of things you could use DeFi Saver for.
Lending/borrowing
Using DeFi Saver, you can lend and borrow in MakerDAO, Compound, Aave, Reflexer, and Liquity. Using DeFi Saver you can lend out assets (eg. $ETH) and earn interest from these Defi protocols.
Using DeFi Saver, you can also borrow digital assets - most often people borrow stable assets against volatile ones and this is something that people do to get some funds into fiat, while effectively maintaining their exposure to ETH or whichever used asset. There are different scenarios of why one might want to do this.
One that is most obvious is that some people want to keep their hard-earned crypto assets and not spend them but still require some solvency. You could for example buy a car, or new furniture, spend them on a vacation, etc.
The collateral you use for the loan can be staked and the returns from the staking can be spent on paying back the loan. Depending on the market conditions this could in some cases actually be a free loan.
Long/short
A long position is created by depositing a volatile asset and taking out a loan in stablecoins, afterward using those newly borrowed funds to purchase more of the volatile asset, you are looking to long. As its value increases, you’ll spend less and less of the volatile asset to repay the stablecoin amount.
Let’s say you have 10 $ETH, you then borrow $6,000 with your $ETH as collateral. Then you spend your $6,000 to buy 5 $ETH. Now you have 15 $ETH in total. But depending on how much risk you want to take you could continue using your 5 $ETH as collateral to borrow $3,000, then spend those $3,000 on 2.5 new $ETH, and so on.
Shorting is on the other hand done by doing the reverse, depositing stablecoins to borrow a volatile asset, therefore repaying the lesser amount if the value goes down.
From time to time I get the question on why you would long/short on a DeFi protocol vs. just doing it on Binance/FTX/Coinbase. The simple answer is “not your keys, not your coins”. Since you’re not in 100% control of your money on a centralized exchange, your money could be frozen or you could be banned from your account. In DeFi on the other hand you are in control of your money, and no one can access your wallet (unless they know your seed phrase).
Yield farming
I’m not going to go into detail about this because the concept is so well-known for degens already, but in DeFi Saver, one can find the yield farming protocols in the Smart Savings dashboard and using it one can easily switch between protocol lending pools in a single tx.
It’s important to note that although liquidity farming was quite a lucrative strategy during DeFi summer 2020 and during the second bull leg from July 21’ - November 21’, it is really dependent on volume and activity in the market. Now, in a bear market, you shouldn’t expect rewards from staking and yield farming to have a high APR.
That being said, there are always some stable opportunities. With the recent addition of Compound v3 to DeFi Saver, one can borrow USDC and then supply to one of the integrated yield farming protocols like for example mStable for additional interest earned.
Using the Smart savings feature you can track the best APY, estimate your earnings, and withdraw or move your assets with the least amount of risk between protocols, in a single click and transaction.
Recipe creator
It allows you to combine several actions, such as flash loans, asset swaps, and other DeFi protocol interactions to perform all sorts of tricks. Some of those include maximizing AAVE and COMP liquidity mining rewards we just mentioned above, moving positions between different protocols, converting debt or collateral assets, and creating instantly leveraged positions.
It’s really super simple and the design is “drag and drop”. In the example below I made a recipe that helps me withdraw money from Uniswap, pay back my Aave loan, supply $DAI to Compound, set Aave to V3 mode, and create a new safe on Reflexer.
Amanusk said it best in this tweet:
Recipe Creator makes it really easy to play around and enables less technically skilled folks to wrap many actions together, which was until recently considered quite an advanced skill and feature used mostly by developers.
Loan Shifter
Loan Shifter is an easy-to-use, but very powerful tool for refinancing. It provides an instant and simple way to change collateral or debt asset and shift between protocols with just a few clicks. It’s a DeFi refinancing tool for protocols.
Although much of what this feature provides can now be done with the new Recipe Creator, Loan Shifter offers a direct and convenient interface for you to:
Switch to a different protocol
Change your collateral asset
Change your debt asset
It’s a simple yet really convenient and informative feature providing essential information about the changes that would happen with the position by shifting or transferring, including collateral, debt, ratio, and borrow power used changes.
You can see the functionality and information in the example below. I’m shifting a CDP created in Maker to the newly integrated, latest version three of Compound protocol.
Currently, Compound is offering some appealing and stable interest and incentives offered for borrowing USDC, it's base asset.
Lastly, DeFi Saver offers one relatively simple, but one of the most important and useful features out there, and one I’d love to see in other DeFi protocols and applications.
Simulation mode effectively creates a safe, sandbox mode and environment where you can test out basically all DeFi Saver features without worrying about committing your assets or what would happen.
It’s also super useful when you just want to test out how would a specific action or move in a DeFi protocol behave or get executed, making sure it will work as intended prior to executing it on a live network. You get a fake 100 ETH and get to play around DeFi Saver safely.
How To Use DeFi Saver - A Step-By-Step Guide
Step 1 - Set up your Metamask wallet
In order to interact with Ethereum, you require a wallet. There are lots of wallets to choose from, but the most known and preferred by many is Metamask. Here is a beginner guide on how to set up Metamask if you haven’t already done it: Metamask guide
Once you have set up and funded the wallet, you can now use DeFi Saver.
Step 2 - Visit the Defi Saver website
Go to DeFi Saver
Make sure that the website is: https://app.defisaver.com/ as there exist lots of scam sites in DeFi
Step 3 - Connect your wallet
Click “Connect your wallet” in the top right corner
You will see a screen similar to this popping up:
Choose browser and enter your MetaMask password when prompted
Step 4 - Choose your strategy/strategies
As mentioned, DeFi Saver offers a wide variety of DeFi strategies: automation, lending/borrowing, yield farming, long/short, recipe creator, loan shifter, smart savings, etc.
Please always make sure you have done your own research and understand the risks involved with each strategy.
Roadmap Going Forward
DeFi Saver has since 2019 processed over 115 000 user transactions and $7 billion in trade volume on the Ethereum mainnet. They have recently made the decision to expand their services onto two Ethereum layer 2 scaling solutions, Arbitrum, and Optimism. This decision was made because there are now enough protocols operating on layer 2's to provide a wide range of services and, secondly, to reduce fees for their end-users.
While nearly all the other features mentioned can be found in various asset management apps, Automation, together with 1-transaction leverage management, is DeFi Saver’s unique feature combo that has made them famous in the DeFi space. Having peace of mind and being able to sleep at night while having positions in this highly volatile market is what inspired them to develop their app.
In line with the continuous support, DeFi Saver has recently integrated the mentioned Compound v3, the latest and improved version of the famous lending protocol. Adding to that the crew is currently working on Liquity Chicken bonds, which drew quite the attention. Basically, chicken bonds mean that the users “bond,” or hand over their stablecoin $LUSD, in exchange for a reward in bLUSD over a period of time. Users in turn will get more bLUSD than the LUSD they deposited. As bLUSD is redeemable one-to-one for LUSD, a simple strategy would be to sell the bLUSD for LUSD and then bond again, thus compounding the boosted yield.
DeFi Saver also recently released the long-promised and internally developed on-chain notification system which provides ratio changes on user DeFi positions, sent directly to an email address or Telegram. Currently, the system supports MakerDAO, Compound v2 & v3, Aave v2, and Liquity, with more integrated protocols coming soon.
DeFi Saver continues to add new DeFi protocols, eyeing new L2 protocols to make their unique and advanced features more accessible to the general public. All the while, the crew is working hard to also provide additional value through an array of features, making the DeFi dashboard one of the most complete and sophisticated DeFi management solutions currently available.
If you want to check out DeFi Saver yourself, take a look at their website: DeFi Saver
And follow them on Twitter here: DeFi Saver Twitter page