This article is part of an informational content series on ICON’s DeFi ecosystem. The series comprises short video explainers and in-depth articles for each of ICON’s DeFi platforms.
This is an introductory article about Optimus, a yield optimizer that invests your money for you on other DeFi protocols in the ICON DeFi ecosystem. Learn the basics about how to get started with Optimus by watching this short video:
The Optimus DeFi Website
It’s very quick and easy to get started with Optimus because — as with all the other DeFi protocols explored in this article series — there is no need to create an account or go through a bothersome know-your-customer (KYC) procedure. All you do is sign in with your ICX crypto wallet and voilà, you’re in.
Sign-in options:
- Hana — the newest Chrome browser extension wallet
- ICONex — an older Chrome browser extension wallet
- MyIconWallet — mobile wallet
- Ledger — a hardware wallet
Once you’re logged in, you may notice the website looks a bit different from the video you just watched. This is because since the video footage was shot, Optimus has launched integration with Omm, another ICON DeFi protocol. However, you will quickly learn your way around the site — while the look is slightly different, the general idea is the same and you will find it to be very straightforward.
In addition to Omm, Optimus is also compatible with Balanced, ICON’s first big DeFi protocol.
How a Yield Optimizer Works
Before exploring the concept of a yield optimizer, it’s important to understand what ‘yield’ is.
DeFi protocols aren’t usually used for traditional banking purposes (yet). Rather, they are mostly used as places to invest crypto that you own, and receive a return on your investment. These returns are called your ‘yield’.
The process of maximizing returns is known as ‘yield farming’, and is the primary way people use DeFi protocols to date. In the future, we may see DeFi eventually be used as alternatives to centralized brick-and-mortar banks, but for now it is expected that most people using a DeFi protocol will be attempting to yield farm in some way or another.
A yield optimizer is a DeFi protocol that kind of acts like an investment manager for yield farming. You sign in to the yield optimizer, allocate some funds to it, pick an investment strategy and let it invest on other DeFi protocols on your behalf, automatically maximizing your returns for you.
The real benefit of using a yield optimizer is that it’s fully automated and it keeps an eagle eye on your investment portfolio 24/7. If there is a sudden change in the market that would cause your investment to lose value, the yield optimizer will make adjustments (as is possible) to ensure your yield is always optimized (as much as possible). This is very useful — without a yield optimizer, you’d have to watch the markets and make adjustments yourself, which is obviously not possible to do alone 24/7.
So, with Optimus, that means you can onboard some money to the Optimus platform, and it will invest in Omm and/or Balanced on your behalf. You choose your investment strategy, and Optimus will continuously watch your investment, ready to make adjustments at a moment’s notice should changing market conditions affect the value of your investment. What’s more, there is no need to sign in to Omm or Balanced or directly onboard your money to them in order to use these investment strategies. However, both Omm and Balanced have other functions that are not possible for Optimus to automate for you.
One important thing to remember is that Optimus — and all yield optimizers — can not 100% guarantee that your investments won’t lose value. All they can do is optimize the yield you receive from the DeFi protocols you invest on. That said, using a yield optimizer is generally considered to be a safer way to do yield farming.
How the Investment Strategies Work
One thing you might notice is that on our video, we mentioned two investment strategies: Borrower and Liquidity Provider. However, since Omm integration was recently added, the website now also has two new investment strategies for Omm: Staker and Lender (With Staker).
Let’s explore the four investment strategies in detail:
Balanced — Liquidity Provider
You can provide liquidity in an sICX / ICX trading pool on the Balanced DEX (decentralized exchange). Other people will be able to use this trading pool to exchange funds between ICX and sICX.
One oddity of the Balanced DEX is that when people use the ICX/sICX liquidity pool to swap funds, ICX in the pool is sometimes automatically converted to sICX after a swap. This is bad for the liquidity provider (LP), as they won’t earn yield on this sICX anymore. Optimus makes sure you never lose out, however, by automatically unstaking and claiming this converted sICX, then immediately redepositing your ICX right back into the pool — optimizing your yield in a way that you could never continuously manage yourself.
Important: Before investing in a liquidity pool, it is important to understand the concept of impermanent loss. Read this article for more information about impermanent loss (also includes a more in-depth explanation of liquidity pools).
Balanced — Borrower
You can deposit ICX as collateral in a Balanced lending pool, and Optimus will borrow a certain amount of bnUSD at a low-risk level. Balanced pays out BALN rewards for the duration that you have a loan taken out on their protocol.
Optimus helps make borrowing on Balanced easier by continuously monitoring and adjusting your borrowing position. Normally, if the price of ICX or BALN suddenly drops below the value of your collateral, that collateral would be liquidated. Optimus helps avoid liquidation altogether by monitoring the market minute-by-minute and automatically reducing the total amount of funds borrowed to always keep your risk threshold within a safe range so that you can continuously earn BALN rewards on your investment.
You’ll still have to be careful about when you withdraw your funds, however — if you withdraw your funds from this investment strategy while Balanced is busy calculating a rebalancing event, the value of your deposited ICX may suddenly change.
Omm — Lender (With Staker)
You can deposit ICX or sICX in a lending pool on Omm. You will be rewarded with OMM tokens, which Optimus will automatically restake.
This works similarly to the Borrower investment strategy on Balanced, minus the borrowing — which also means minus the risk that Optimus has to continuously mitigate. Instead, how Optimus helps in this strategy is by continuously claiming and staking the OMM tokens you earn, thereby compounding your rewards — you earn more OMM when you stake, too.
Omm — Staker
This is the simplest investment strategy of all. Deposit OMM tokens on Optimus, and it will stake them on Omm for you. Omm gives daily rewards for stakers in the form of more OMM tokens, which Optimus will automatically claim and stake for you, compounding your rewards.
Fin Tokens — Earn and Stake on Optimus
When you use any of Optimus’ investment strategies, you will also earn FIN tokens from the Optimus protocol. You may also receive finOMM tokens if you use the Omm investment strategies. All of these tokens have financial value, and can be restaked on the Optimus platform for even more compounded rewards.
This is easy to do: just claim your rewards on the Rewards screen, and stake them on the Staking screen. These screens look a bit different on the new website from what you saw on our video, but the new layout is also even easier to navigate so you’ll have no trouble at all.
If you’ve supplied liquidity to FIN/bnUSD or FIN/sICX trading pools on the Balanced DEX, you can also claim further FIN rewards on Optimus’ Staking screen. Note that you can not supply liquidity to these pools on Optimus — you’ll have to head over to Balanced and deposit FIN to a liquidity pool there. This also means that you’ll also have to remember to return to Optimus regularly to claim your FIN tokens, and either stake them on Optimus or bring them back to the Balanced liquidity pool again. It’s a bit more work, but also offers more rewards.
As far as Optimus goes, that’s about all there is to it. You can access the Optimus app on their website — use your computer — and you can keep up with Optimus developments on their Twitter page, Discord server, or Moim message board.
