Who is Louverture.Finance?
In recent months, yield farming has grown in popularity massively, with hundreds of new projects cropping up. Combine this with the recent parabolic growth of $AVAX and the Avalanche network and it’s easy to see why so many investors are hyped up about Louverture.Finance – the latest AVAX-based yield farming project.
Louverture.Finance is a yield farming project on the AVAX network. They’ve only been around for around a month at the time of writing (28/12/21), meaning it’s still early days. In this short period, they’ve already grown to become the 2nd largest yield farming project on Avalanche. They’re frequently mentioned alongside coins like $RING and $TIME.
On top of yield farming, Louverture has also begun to invest in promising new projects, generating returns for holders through venture capitalism. This is a great way to ensure the treasury stays afloat while providing such high rewards.
How Can You Spot a Yield Farming Scam?
The yield farming business model is particularly susceptible to scams to rug-pulls because it incentivises holding for a long period rather than selling. This allows the team to pump the price and sell a large number of tokens for massive profit, completely decimating the token’s value. Typically, a good way of spotting a scam is by looking at the APY offered, if the rate is unsustainable then it’s likely a scam aiming to draw in as many investors as possible in order to increase the price. While Louverture initially launched with a 2700% APY (incredibly unsustainable) they’ve since lowered this to a far safer 15% per month. Surprisingly, this decrease in rewards actually drew in a large number of investors as it somewhat legitimized the project. Here’s an article by Louverture explaining why higher rates of rewards are not sustainable.
Additionally, judging by the whitepaper, Louverture is either in the middle of or about to begin a 3rd party audit of their smart contract. This again helps to legitimize the project as it stands to reason that an audit would reveal anything out of the ordinary.
What is Yield Farming?
While yield farming may sound complex or heavily involved, the reality is that couldn’t be further from the truth. The only real effort involved is selecting a solid project and keeping up to date with the goings-on of said project. The basic premise of yield farming is that you lock up a certain token which, in turn, gets loaned to others or used to add liquidity to various protocols with the aim of generating a return for investors. If you’ve ever locked a token for staking in Crypto.com or Binance, you’ve participated in a form of yield farming.
How Much Can You Earn From Yield Farming?
While the APY (annual percentage yield) can vary massively from project to project (0.5% – 2700%), almost every reputable project will be on the lower end of this scale as high rates of interest are not sustainable over the long term. While Louverture launched boasting an interest rate of between 4-7% per day (around 2700% per year) they have since lowered this rate to just 15% per month – a far more sustainable rate.
Something we should cover briefly is Louverture’s tokenomics. We’re a big advocate of researching how a project will distribute tokens as it can be an excellent way of gauging the legitimacy of the project. Something very important to note when creating a node with Louverture is your tokens will be locked forever. I wasn’t originally aware of this when I created my first node – this was not clearly communicated in my opinion.
When a node is created:
70% is allocated to the distribution pool.
20% goes to the treasury.
10% gets added to the liquidity pool.
How Can I Make Money With Louverture?
Considering your initial investment will become locked, you might be wondering if Louverture is actually profitable. While this does of course depend massively on the continued growth of the project and the LVT token, things seem promising. Currently, the rewards rate is around 15% per month, meaning you would earn your investment back in just over 6 months. However, this doesn’t take the coin’s value increasing into consideration. You should also note that whenever you decide to compound your returns, your bonus percent increases. Say you’re earning $100 a day and you compound every 4 hours after 1 day you would be earning an additional 12% ($100 + $12).
Let’s say you own 100,000 $LVT every month you would earn an additional 15,000 tokens, after 1 year of compounding monthly you would own 535,000 tokens – a 535% gain. Meaning you would be earning 85% of your initial investment every month – assuming a constant 15% return. Additionally, if the value of $LVT were to rise by just 8.5% each month, after a year the LVT’s value would’ve doubled, meaning that 85% you would earn monthly actually has a value equivalent to 170% of your initial investment. Not bad for pressing a few buttons every day!
Is Louverture.Finance a Scam?
Despite initially seeming like an unsustainable project designed to draw in investors ahead of a rug-pull, Louverture has had excellent communication with investors, been constantly improving, and focusing on sustainability. Overall, we have to say this is an exciting project and although extremely promising we do recommend not risking more than you can afford to lose. My position is equivalent to around 0.3-0.5% of my portfolio; we don’t recommend attributing much more to these high-risk, high-reward projects.
APY or annual percentage yield shows how much of a return you can expect over a one-year period.
Yield farming is a way of generating returns for investors that involves lending out money to 3rd parties. The liquidity for these loans is generated by investors locking up the tokens.
Despite originally launching with a 2700% APY, that number has since dropped to a far more realistic 15% per month (180% APY).