Strengths and Weaknesses
- Great way to earn passive income
- User-friendly interface
- Shows the real APY
- High level of decentralization
- Top-tier security practices
- Tokens can be withdrawn at any time
- Manual compounding can provide better APY (because of the fees)
- Activity in community governance could be higher
- High APY usually doesn’t remain for long
Beefy is a decentralized platform that allows users to earn compound interest on their cryptocurrency holdings through various investment strategies. The platform offers "vaults" in which users can stake their crypto assets and the investment strategy tied to the vault will automatically increase the deposited amount through yield farming. This provides a huge advantage over attempting to do this manually.
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Functioning of the Protocols
Beefy offers complex strategies that are simple and intuitive for any investor to take part in through the vault offerings on the platform.
A vault is a type of investment instrument that uses automation to continuously invest and reinvest deposited funds in order to achieve high levels of compound interest. In a Beefy vault, users can earn more of the asset they stake in it, whether it is a liquidity pool (LP) token or a single asset. Beefy vaults are not locked and users can withdraw their funds at any time. It is generally best to keep them in the vault for the medium to long term in order to maximize the effects of compounding.
Vaults can be invested in pairs of assets in liquidity pools, single assets in lending platforms, or single stake reward pools. After depositing tokens into a vault, users are given vault-specific mooTokens, which represent their share in the vault. Users can choose from more than 600 vaults.
- Efficiently execute yield farming strategies
- Compound rewards into the initially deposited asset amount
- Use any asset as liquidity through ZAP
- Provide one asset as collateral for another
- Manage collateral at a safe level to mitigate liquidation
- Put any asset to work to generate a yield
- Reinvest earned profits
The user deposits the LP assets in these vaults and the protocol automatically harvests (collects) the rewards (most likely, liquidity mining incentives) multiple times daily, sells them to buy more of the tokens of the liquidity position and increases the LP position with them, before finally redepositing the newly received LP tokens back into the vault. This process is called auto-compounding.
Single asset vaults
Single asset vaults accept deposits of a single asset and can either just farm and auto-compound the reward from a yield farm or, more frequently, use the following money market strategy:
- Deposit asset A into the lending side of the money market, earn interest in the same asset and reap eventual liquidity mining rewards (which will be auto-compounded
- Borrow asset A with a safe LTV (note that there's no liquidation risk since it's the same asset on both sides)
- Deposit the borrowed assets into the lending side, earning even more interest
- Return to step 2, until the strategy can't be looped again
By depositing into a vault, the user receives mooTOKENs, a claim on their shares of the vault.
There are no deposit or withdrawal fees on Beefy (unless explicitly shown), but the vaults have a performance fee structure, taking a percentage cut off all harvest rewards. Legacy vault fees are 4.5 % and new vaults have 9 % fees. This fee on profits is split up and distributed back to BIFI stakers, allocated to Beefy's treasury, sent to the vault developer, then sent to the one calling the vault's harvest function. These fees are already built into the APY of each vault and daily rate - you do not need to calculate it yourself. The performance fee and the fee structure breakdown are presented inside the Deposit and Withdraw module in a vault. This means that the APY shown is the actual interest the final user earns.
BeefyZap saves time and money using 1inch API to swap deposited assets into assets needed to enter a Beefy auto-compounding vault. It is possible to use blue chips or stablecoins to enter or exit vaults. BeefyZap builds the liquidity pool (LP), and deposits it into Beefy vaults for auto-compounding (AC). This way, users can access market-leading returns directly, with the assets already in their wallet.
When the time has come to withdraw from a LP vault, Beefy Zap also supports withdrawals back into a supported asset. This saves the hassle of manually adding and removing liquidity at a yield farm.
Automation with Gelato
Gelato is a decentralized automation protocol that allows EVM-based blockchains to schedule the execution of tasks. Beefy is using Gelato to decentralize the harvesting of its vaults. Harvesting is a vital process for the health of Beefy's protocol, and Gelato's decentralized infrastructure allows for automated key functions to be executed at predefined intervals and conditions for a more efficient user experience. This also saves development resources and maximizes compounding efficiency for the benefit of the Beefy community.
Beefy's contracts do not use external oracles. The problem with oracles is, in short, that the data can be inaccurate or manipulated, and unreliable oracles can lead to exploits. Because Beefy's contracts do not rely on external data in any form, such as asset prices, their vaults are not susceptible to flashloan exploits.
BeefyZap is one of many innovations the Beefy team have implemented recently. It simplifies the whole process of depositing into the vault to just one step.
$BIFI is the governance token of Beefy and is used to earn a share of the platform's revenue, and to vote on governance decisions. It can be staked to earn more $BIFI or other cryptocurrencies.
People who own BIFI tokens have the right to have a say in the decision-making process of Beefy's DAO (Decentralized Autonomous Organization). These token holders can propose and vote on governance proposals or the creation of new vaults. In order to submit a proposal, a person must hold at least 1 $BIFI and the process is straightforward, requiring only a title, description, and a link for discussion. Many of the proposals made on the platform request funds, but some also suggest new features. Beefy has implemented a custom Snapshot solution to enable voting on multiple chains. While only $BIFI holders can create and vote on proposals, anyone can contribute to the development of Beefy's ecosystem by joining discussions on the protocol's Discord or Telegram channels.
Only a few people are currently active in the governance and most of the votes have been coming from no more than 200 addresses. The vote that got the most attention was “[BIP-45] Protocol Sustainability” which passed with 54% of the 260 votes, representing only 15 000 out of 80 000 BIFI tokens. BIP-45 changed the fee structure to increase the Beefy treasury revenue in the name of long-term sustainability.
Revenue and Tokenomics
After an initial distribution period of around two months back in Q4 2020, 72 000 BIFI tokens were supplied to the community, with 8 000 being locked for the founding team. The supply of $BIFI is capped at 80 000 tokens and is available on various exchanges.
$BIFI staked in the BIFI Maxi vault allows users to accumulate more $BIFI. In order to distribute $BIFI to anyone who has staked in the BIFI Maxi vault, $BIFI buy-backs from the open market are performed as the token is non-inflationary and will not mint any more BIFI tokens, ever.
All revenue generated on the platform from vault fees is sent to and handled by the RewardPool smart contract in the form of the native token of the chain. Anyone who stakes their $BIFI in either a BIFI Earnings Pool or a BIFI Maxi vault receives their proportional share.
Performance fees in all the new vaults is 9.5 % and is divided in the following way:
- 5.73 % is allocated to the Beefy Finance treasury
- 3.22 % is distributed back to $BIFI stakers
- 0.5 % is awarded to the vault strategist
- 0.05 % is awarded to the one calling the harvest function
The Uniqueness of the Protocol
Beefy is a leader in cross-chain yield optimization, with a Total Value Locked (TVL) of over 250 million USD (Jan, 2023). They offer a variety of strategies, such as liquidity pool pairs and mooVaults, which improve Annual Percentage Yield (APY) for their users. They have also implemented rigorous security practices in place to protect user's assets. Additionally, with a BIFI token and decentralized governance system, it is one of the best organized and most decentralized protocols in the world of DeFi.
Beefy was created on September 21, 2020 when governance distribution contracts went live. The first vaults opened in October 2020 on Binance Smart Chain (BSC). Over time, the team have built many partnerships and launched their vault on 17 additional chains.
Nov 2021 - New UI
Feb 2022 - Change to Snapshot governance
Mar 2022 - Gelato integration
July 2022 - Optimism integration
Nov 2022 - Ethereum mainnet integration
Jan 2022 - Treasury dashboard and ZAP v2
Beefy protocol was involved in a hacking incident on Reaper Finance in December 2021. They secured part of the funds and distributed them back to the Reaper Finance users. This whitehat operation was received with criticism from the community.
Although the official roadmap is not public, Beefy Finance will continue to provide new opportunities for users to invest and grow their assets through the introduction of additional investment options and the development of innovative strategies to maximize returns. With the addition of new chains like Optimism, it is just a matter of time before Beefy becomes the most prominent Yield Aggregator on the market.
Among the latest updates were a new Treasury dashboard, which adds a new layer of transparency and BeefyZap v2, which simplifies deposits and withdrawals.
The ease of use and “set and forget” approach of Beefy brings more liquidity to decentralized exchanges (DEXs) and other DeFi protocols because the general UI/UX in the ecosystem is usually worse than Beefy’s.
Beefy operates in a decentralized manner, and was founded by a group of skilled developers, known by the pseudonyms @0xbeefy, @superbeefyboy, @sirbeefalot_bnb, and @roastyb1. Most of the team members are acting under their nicknames, but the team is not fully anonymous. Team members go to conferences and are interviewed, both of which require physical presence. Integrations with large crypto exchanges also require the provision of personal information. Community managers and team members can be contacted anytime through the Discord or Telegram channels.
Although there is not much information available about the team, at this level of decentralization where important decisions are made by BIFI token holders, it is no longer considered essential to have detailed information about all team members.
Community and Marketing
The heart of most of the DeFi protocols is community, which is where Beefy excels. Beefy’s community Discord has 14 000 members with a lot of activity, the Telegram group has almost 18 000 members, and their Twitter profile has more than 270 000 followers. There is usually someone from the team available to answer questions in a reasonable time frame.
Investors and Partners
The Beefy protocol grew without the need for investors or venture capitalists.
Beefy has demonstrated its ability to leverage partnerships with other projects on multiple chains to promote cross-chain adoption. Among Beefy’s partners are many chains, DEXs, wallet integration partners, and insurance, infrastructure and security firms.
To provide comprehensive DeFi insurance products, Beefy has partnered with InsurAce.io, Nexus Mutual and Solace. The cost of the insurance is usually between 2 and 5 %, subtracted from the APY.
Risks and Decentralization
Beefy is open-source, permissionless, non-custodial and no KYC is needed to use the application. The overall level of decentralization is high.
- Impermanent loss (IL) - Assets deposited can decrease in monetary value (less in USD) but usually the user can usually withdraw a higher number of assets than was originally deposited.
- Smart contract - As with any smart contract, the ultimate risk is that an investor's funds can end up being stolen or otherwise unable to be withdrawn. Beefy does take steps to quantify the security risks of smart contracts and will only interact with those ones that meet a specific set of requirements after excessive testing, in order to make sure that the underlying platform does not contain so-called 'rug pull' functions. Each vault’s safety is expressed by the Beefy Safety Score.
- Contagion risk - Beefy offers a variety of mooVaults, only a small portion of which them are likely to fail at any given time. Concentration risk may occur if Beefy only has a limited selection of mooVaults available, or if many of the mooVaults are tied to the same assets or projects. To mitigate this risk, Beefy has established guidelines (called Beefy SAFU Practices) for evaluating and accepting projects into their Launchpool program. While the protocol cannot guarantee the solvency of any Launchpool project, it does perform due diligence to ensure that none of the accepted projects are "rug pulls," which refers to a sudden and unexpected withdrawal of funds from a project.
Beefy is very transparent in almost all the aspects that matter. The team recently added a treasury dashboard, containing all the necessary details about Beefy’s treasury holdings. The value of the holdings is 2.3 million USD as of January 2023.
Protocol Security and Audits
Beefy smart contracts are secured with timelocks and multi-sig dev wallets, which have been audited by security organization, CertiK. In order to guarantee top-level security for the deposits, Beefy has launched a bug bounty program with ImmuneFi.
Beefy is open-source, non-custodial and no KYC is needed to use the application.
Beefy Finance is one of the best auto-compounders on the market. Beefy is making yield farming more convenient with constant innovative upgrades. Unlike most of the competitors the Beefy protocol and its governance is available on multiple chains. Beefy allows users to earn the greatest APY in an efficient and safe way in a well designed and easy to use interface.