◽General
Last updated
Last updated
A yield optimizer is an automated service designed to maximize returns on crypto investments, far more efficiently than manual efforts to optimize yield.
Each vault has its own unique farming strategy, typically involving the reinvestment of staked crypto assets in liquidity pools. At its core, the process involves farming rewards earned from staked assets and reinvesting them back into the liquidity pool. This reinvestment compounds the interest earned, increasing the staked amount upon which the yield is calculated. A yield optimizer can repeat this process thousands of times a day.
This straightforward approach is the primary reason behind the high APYs found on BIM. Compounding fees are shared among all participants in a vault, reducing the cost for individual users.
APR (Annual Percentage Rate) represents the annual interest earned on an investment, excluding any fees. It does not account for the compounding of profits. For example, if you invest $100 at a 100% APR, you would earn $100 in profit over the course of a year.
However, if you regularly reinvest your profits, you will benefit from compounding interest. When calculated over a year, this gives you the APY (Annual Percentage Yield). The more frequently you compound your interest, the greater the difference between APR and APY.
APY (Annual Percentage Yield) reflects the annual return on an investment, including the effects of compound interest. This gives a more precise understanding of your potential earnings compared to simple interest.
Exceptionally high APYs, often in the thousands of percent, are achievable with investments offering daily yields of 1% or more. As rewards from liquidity pools are consistently farmed and reinvested, the interest compounds on ever-growing amounts.
Trading Daily refers to how much the value of your liquidity tokens increases each day. Liquidity pools distribute trading fees among all liquidity providers, following the Uniswap liquidity model. The daily trading return is influenced by trading volume and the percentage of swap fees allocated to liquidity providers.
Vault Daily indicates how much your token quantity increases over time. As the vault continuously farms rewards and reinvests them, the amount of your deposited tokens grows. Vault Daily is affected by yield farm rewards, such as additional incentives like QUICK on Quickswap, beyond the standard trading fees.
To calculate Trading APR and Vault APR, both Trading Daily and Vault Daily can be multiplied by 365. Vault APR is then converted to Vault APY to account for compound interest. The displayed total APY percentage is calculated as follows:
In a Vault you earn more of what you deposited into it, with compound interest (APY). In an Earnings Pool you earn a different token than the asset you deposited, with linear interest (APR).
Many of BIM's vaults implement a "Harvest on Deposit" feature. This means that when you make a deposit, the harvest function is triggered simultaneously. Since calling the harvest function is more complex than a simple deposit, it comes with a higher gas limit and fee. BIM uses this method to prevent malicious actors from stealing yield, eliminating the need for a withdrawal fee. This approach is particularly advantageous for long-term investors, as it allows for the removal of the withdrawal fee.
Most vaults on lower-cost chains like Base and Polygon operate with harvest on deposit. You can easily identify if a vault has this feature by checking if there is no withdrawal fee.
Your rewards are added to the amount of your token deposited in each harvest and composition cycle. You can use the dashboard which will be able to calculate exactly how much profit you have made on your investments.
