DAOing DeFi with ShapeShiftDAOing DeFi with ShapeShift

There are numerous features on the new open-source ShapeShift web app, and it can be difficult to keep up with what those features do outside of providing a decent return. By understanding different DeFi strategies in the crypto space and the available opportunities offered by ShapeShift, users are better positioned to make educated DeFi decisions.

DeFi Opportunities Within ShapeShift

Uniswap v2 Liquidity Pool

The Uniswap protocol is made up of a series of smart contracts that hold pairs of tokens. These smart contracts let you exchange any ERC tokens quickly and securely. Anyone can earn a commision for contributing their tokens to a ‘liquidity pool’, which ensures tokens are available when needed. Depending on how much you have contributed to the pool, you will receive a proportional share of fees paid by traders fees paid by traders - click here to add liquidity . At the time of writing, the v2 ETH-FOX  liquidity pool on Uniswap currently contains $20.2 million.

ShapeShift v3 Farming Program

The Uniswap v2 liquidity pool allows FOX holders to provide liquidity on the decentralized exchange Uniswap. Liquidity Providers have the option to stake their ETH/FOX LP tokens in the ShapeShift staking contract. LPs who have staked their tokens in the ShapeShift staking contract receive a proportional share of the allocated FOX Token rewards. The DAO recently voted to continue its reward program on the Uniswap v2 FOX/ETH Pool, allocating 13.5 million FOX from February 22nd, 2022 to July 7, 2022, targeting a 75% APR. 

FOX Token holders will continue to enjoy farming rewards and can use this helpful guide to learn how to add FOX to the FOX/ETH liquidity pool on Uniswap v2 and utilize the v3 ShapeShift LP staking contract. The continuation of this program plays an essential role in ensuring that FOX has sufficient liquidity on DEXs — such as Uniswap — read more about the new farming rewards here. 


One of the first partnerships ShapeShift established as a DAO was with Yearn.finance, whose protocol has a built-in affiliate revenue program. Through this partnership, ShapeShift integrated Yearn vaults into the new open-source v2 web app, allowing users to earn yield on their digital assets with no added fees. As the v2 platform’s capabilities expand, ShapeShift continues to enable users to enjoy the best yield and a unified user interface with no added fees. 

It is difficult and risky for an everyday DeFi user to formulate and implement complex investment strategies like Yearn’s. Through focusing on smart contract audits, code evaluations, rigorous internal creation and maintenance processes, Yearn vaults provide users with a heightened level of security and broad exposure to the bleeding edge of DeFi.

Yearn is a yield aggregator that maximizes yield by strategically allocating liquidity to various DeFi protocols. One of the reasons Yearn is appealing is its ability to make complex yield farming strategies available to the average crypto user. At the time of writing, Yearn manages 89 vaults and implements 250 different yield-farming strategies across those vaults. The number of vaults and strategies is constantly being added as new opportunities manifest themselves — click here to read more about Yearn strategy development. The ShapeShift v2 web app has 62 Yearn vaults available here. These vaults allow users to easily provide liquidity with a wide range of tokens and generate yield. 

The Yearn integration with ShapeShift offers users access to these advanced DeFi strategies by Yearn with the same clean, consolidated ShapeShift UI — all while generating affiliate revenues for the DAO — read more about ShapeShift’s partnership with Yearn here.

DeFi Opportunities Coming Soon 

The development of FOXy is one of the many things the community is excited about. While the ShapeShift DAO plans to incorporate many yield strategies in the future, this bounty focuses on building out a basic functional version of FOXy: a yield-bearing version of FOX Tokens. Once it is live, it will allow holders to stake their FOX in the FOXy contract, then share in the rewards (such as increasing partnership revenue) generated by the DAO. You can read the full FOXy proposal here in the ShapeShift forum. 

DeFi Strategies

Yield Farming

Yield farming protocols incentivize liquidity providers (LP) to stake or lock up their crypto assets in a smart contract-based liquidity pool. These incentives can be a percentage of transaction fees, interest from lenders, or a governance token. These returns express themselves as an annual percentage yield (APY). As more investors add funds to the related liquidity pool, the value of the issued returns decrease accordingly — read more about Yield Farming here.


Simply put, staking is the act of locking cryptocurrencies to receive rewards. The reason your crypto earns rewards while staked is that the blockchain puts it to work. Cryptocurrencies that allow staking use a “consensus mechanism” called Proof of Stake, which is the way they ensure that all transactions are verified and secured without a bank or payment processor in the middle. Your crypto becomes part of that process if you choose to stake it. Think of “staking pools” as something similar to an interest-bearing savings account — read more about staking here.

Liquidity Providing

A liquidity provider is a user who funds a liquidity pool with crypto assets to facilitate trading on the platform and earn passive income on their deposit.

Liquidity pools are leveraged by the decentralized exchanges that use automated market maker-based systems to allow the trading of illiquid trading pairs with limited slippage. Instead of using traditional order book-based trading systems, such exchanges use funds held for every asset in every trading pair to execute trades.

Trading illiquid trading pairs on order book-based exchanges could lead to suffering from considerable slippage as well as the inability to execute trades. The advantage liquidity providers bring to this ecosystem is that trades can consistently execute as long as the liquidity pools are big enough. This is why liquidity providers are seen as trade facilitators and paid respectively with a portion of the transaction fees of the trades they enabled through their liquidity provision.

How much liquidity providers are paid is based on the percentage of the liquidity pool that they provide. When funding the pool, they are usually required to fund two different assets to enable traders to switch between one to the other by trading them in pairs.

For instance, a liquidity provider may provide a liquidity pool with $5,000 worth of Ether and $5,000 of DAI to allow trading back and forth between the two. This way, every time an ETH/DAI trade is executed, the liquidity provider would receive rewards for having funded the pool — read more about liquidity providing here.

Other DeFi Strategies


Bonding is a mechanism in which a user can sell assets to a protocol in exchange for its native token.

Bonding is used to incentivize users to sell to the protocol rather than the open market. Bonds are often offered at a discounted rate. They also have a vesting period to prevent users from selling all the discounted tokens at once for a quick profit. The supply and demand of bonds determines the bond price — the price trends higher when there is more demand and lower when there is less. As a result, bonding is a competitive space, and bonders compete to grab the most significant discount.

Bond price is also controlled by a BCV (Bond Control Variable). It is a parameter set by the policy team to adjust bond capacity. When BCV increases, bond price increases, thus resulting in a smaller bond capacity. A higher BCV means a lower discount for bonders and higher inflation by the protocol. A lower BCV means a higher discount for bonders and lower inflation by the protocol - read more about bonding here.


Crypto-backed loans are secured loans. Borrowers use digital assets as collateral for loans, similar to how a house or a car is used as collateral for a mortgage or auto loan. You may not intend to use or trade your cryptocurrency in the foreseeable future, so this allows you to get money for expenses you need to cover now without needing to make a transaction with your digital assets.

Though this list is not exhaustive, you can find crypto-backed loans on marketplaces like BlockFi, Binance, and Rari. 


Understanding the basic mechanisms that DeFi is built upon allows users to better control their funds, risks, and participation opportunities within the space. ShapeShift offers a platform for users to access and explore a wide — and growing — array of DeFi mechanisms and protocols to help facilitate maximum exposure and utility for users' tokens. 

Want to learn more? Check out this helpful article on What can I do with my FOX? to learn more about FOX token utility outside of existing ShapeShift integrations.

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