Injective will be collaborating with Formation Fi to create multi-chain risk optimized yield farming derivatives.
The integration will focus on creating risk-adjusted yield farming derivatives that will allow a greater number of users to access DeFi yield opportunities with ease.
Yield Farming Derivatives: A Recap
Last year, Injective launched the world’s first yield farming derivatives on our Solstice V2 testnet which allowed anyone to access derivatives that tracked stablecoin yields on protocols such as Yearn Finance.
On a basic level yield farming involves locking digital assets into a protocol which then earns the owner yield. Normally by adding tokens into a liquidity pool, a user (or “yield farmer”) is effectively able to provide additional liquidity for trades or other functions. Liquidity mining allows yield farmers to earn more tokens in addition to the usual return in exchange for their help in providing more liquidity.
Injective’s first yield farming derivative tracked the performance of $1,000 USDT on Yearn Finance’s USDT3pool. Since users can access yield via decentralized derivative contracts, they can circumvent the usual high gas fees or complex interfaces that tend to hamper DeFi adoption.
An Introduction to Formation Fi
Formation Fi is a cross-chain risk parity farming protocol.
Formation has created a risk parity protocol that constructs custom portfolios to optimize the return to risk ratio. The protocol works via algorithmically rebalancing portfolios based on projected asset risk-reward ratios. For example, a risk-averse user’s funds would be deployed into safer strategies that involve less risk but also offer less APY.
Risk Adjusted Yield Farming Derivatives
Our work with Formation Fi will extend upon the previous yield farming derivatives that we have created.
From a user perspective, you can choose to create new derivatives markets based on the available indices on Formation’s platform. Rather than interacting with a single yield farming pool, individuals can now take part in a basket of multi-chain assets that are generating yield on a risk adjusted basis. An added benefit of using Injective is being able to avoid any gas fees due to our layer-2 infrastructure.
“On our Solstice V2 testnet, we presented users with the opportunity to take part in yield farming derivatives. The collaboration with Formation Fi will enable Injective users to launch new risk optimized derivatives markets with ease, which would again help abstract away many of the convoluted steps required to earn yield today on DeFi protocols,” said Injective CEO, Eric Chen.
As interest in DeFi protocols continue to rise, it becomes more imperative than ever before to have new risk management options. The introduction of these decentralized derivatives contracts helps move us one step closer to this goal.
“In order for the space to mature, there needs to be a protocol to address these major risk concerns associated with DeFi. This is what we will bring, Formation Fi will bridge traditional hedge fund strategies and wall street tools into DeFi to reduce overall risk exposure to our users. I believe that this collaboration with Injective will open up a lot of opportunities to construct and design optimized yield farming strategies as the world of derivatives opens up,” said Edmond Truong, Co-Founder of Formation Fi.
The ability to customize and launch new markets is one of the core functionalities offered by Injective. We look forward to bringing access to new decentralized markets in order to create a more free and fair financial system for everyone.
About Formation Fi
Formation Fi creates a new risk-adjusted portfolio of decentralized open financial crypto assets in the form of algorithmically rebasing indexes, with a high degree of composability, across the major blockchain networks. Formation is backed by by Synthetix, Polygon, and a number of major funds in the crypto space.
About Injective Protocol
Injective is the first decentralized multi-chain exchange protocol that unlocks the full potential of decentralized derivatives and borderless DeFi. Injective enables access to unlimited decentralized markets for futures, perpetuals, spots, synthetics, and much more. Injective is backed by a prominent group of stakeholders including Mark Cuban, Pantera Capital and Binance.
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