Terra Wormhole Bridge and its Implications to the Terra Ecosystem
Cross-Chain Yield Farming Opportunities on the Solana network
Governance discussions on allocating community pool funds to various projects on Solana network has recently been one of the most actively debated topics on the Terra Research Forum. The governance proposal for funding Liquidity Mining incentives for Mercurial Finance’s UST 3-Pool has been a huge success, and the ongoing vote on funding Saber AMM is met with great reception across the board. We are grateful to the community for the constructive discussion and believe that fund allocation for liquidity mining rewards will attract new investors to try out the UST pool, effectively raising awareness of Terra ecosystem and fueling the growth of the network. The community is also anticipating the Wormhole Bridge for Terra to go live soon, which will unlock seamless integration with DeFi apps on Solana network.
In preparation of the Wormhole launch, we will examine some key metrics of the two networks and explore some promising yield farming opportunities available on Solana network.
Disclaimer: Not financial advice, always DYOR. More information on Wormhole Bridge can be found here.
The Positive-Sum Game of Interchain Operability
Over the past week, LUNA exhibited some strong recovery and reclaimed the top 20th position by market cap at $5.7B. Solana has also been one of the top performing large cap cryptocurrency in the past week, ranking top 14th position by market cap at $9.6B. Even when combined with TerraUSD market cap, the Solana network boasts a market cap that is $2B larger than the Terra network.
Total Value Locked (TVL), a metric often used to gauge the usage of DeFi on a network, measures the amount of the underlying asset that is being secured by a specific DeFi application. Below table outlines the two ecosystem’s TVL and their respective TVL to MC ratio. LUNA’s high 72.1% TVL/MC ratio demonstrates the active DeFi engagement of investors on the network, while Solana’s 13.0% TVL/MC ratio hints the massive potential for growth. Even when combining the market cap of LUNA and TerraUSD for a more conservative comparison, Solana’s upside potential of TVL is rather optimistic.
While the market cap of Solana is almost twice as large as that of LUNA, Total Value Locked is significantly higher on the Terra network. The larger market cap cryptocurrency tend to have better visibility on the space in general (News, Blog posts, Hype, etc.) while higher TVL means more users and activities on the network. We believe that the interchain operability facilitated through the development of Wormhole Bridge V2 will allow the two cryptocurrencies to have the best of both worlds. The easy communication between the two networks will likely see a strong initial surge of Terra assets into the Solana network, while the higher market cap project will effectively raise awareness for Terra, ultimately introducing new-comers into the Terra space.
New Yield Farming Opportunities on Solana
There are multiple promising DeFi platforms with large user-base on the Solana network, the most popular being Raydium AMM DEX with $583M TVL (46% of the Solana TVL). Saber has gained traction from both the Terra and Solana community, ranking 3rd on the list with over $150M TVL, and Mercurial Finance grew 80% in TVL since the launch of UST-3 Pool.
Currently, the two major DeFi platforms that offer yield farming with Terra assets are Saber and Mercurial Finance. Both platforms yield slightly higher APY% than Anchor deposit at the time of writing, but keep in mind that APY% can be very volatile in DeFi platform and it’s always a good practice to monitor the APY% for some time before providing liquidity.
Saber UST-USDC & wLUNA-renLUNA LP Pool
Saber currently offers two pools with Terra assets; UST-USDC pool with 23% APY and wLUNA-renLUNA pool with 25% APY. The key difference between Anchor deposit and UST-USDC pool on Saber is the asset in which the yield is paid out. Unlike Anchor deposit, Saber pool offers the yield in SBR, the native governance token of Saber. This is precisely why the APY% can be volatile on DeFi platforms like Saber. The changing price of SBR can affect the APY% of the yield farm, along with the varying liquidity on the pool (In general, the higher the liquidity of the pool, the less your portion of the liquidity, meaning lower APY% as the liquidity increases). Nevertheless, utilizing such yield farming can be the right strategy for you if you believe that the value of the native token will rise in value.
Assuming Terra Wormhole Bridge is released, the flow for yield farming on Saber UST-USDC pool is as below (it’s certainly possible to provide liquidity with currently available bridges, but requires more steps and is less intuitive)
- Transfer UST from a Terra Wallet to Solana Wallet of your choice using Wormhole Bridge V2. You will need to connect both your Terra Wallet and Solana Wallet at the same time. The UST will be displayed as wUST (wrapped UST) on Solana Wallet.
- Prepare equal amount of USDC from either CEX or DEX and send it to the same Solana Wallet as step 1. Your Solana wallet should have equal amounts USDC and UST.
- Go to Saber UST-USDC Pool and supply equal amount of USDC and wUST. You will receive LP tokens that corresponds to the amount of USDC/wUST supplied.
- Go to Saber UST-USDC Farm and stake the LP tokens from step 3.
- Harvest yield
The flow for yield farming on wLUNA-renLUNA is the exact same as above except step 2. Go to RenBridge to mint renLUNA by choosing LUNA as the token to send and Solana as the destination network. RenBridge will supply you with a Terra address to which you can send your LUNA using a Terra Wallet and consequently mint renLUNA into the destination Solana wallet. Similar to the UST-USDC pool, the farming reward will be paid in SBR.
Mercurial UST-3 Pool
The UST-3 Pool is unique in that the liquidity does not have to be supplied in equal amounts. This is especially convenient for investors migrating from Terra. The pool currently yields 27.9% APY and the rewards are paid in both LUNA and MER, the native token of Mercurial Finance, at around 1:10 ratio. If you are bullish on the future price of LUNA and MER, supplying your UST on UST-3 Pool may be the right strategy for you.
The flow for supplying liquidity to the pool is much simpler with Mercurial Finance. We will assume that Terra Wormhole Bridge is live in the below steps as well.
- Transfer UST from a Terra Wallet to Solana Wallet of your choice using Wormhole Bridge V2. You will need to connect both your Terra Wallet and Solana Wallet at the same time. The UST will be displayed as wUST (wrapped UST) on Solana Wallet.
- Go to Mercurial UST-3 Pool and enter wUST amount you wish to supply.
- Click on “Deposit”
- Harvest rewards. (Available daily via the rewards page)
It’s certainly an exciting time for Terra. With the much anticipated Columbus-5 upgrade and the integration capabilities of Inter-Blockchain Communication Protocol, we are confident about Terra flourishing and inviting many new investors to the network. We plan on releasing more detailed step-by-step tutorial for yield farming and other interesting integration opportunities once Terra Wormhole Bridge goes live.
Stay tuned!
Please feel free reach out to us on Four Barbers Twitter with comments or suggestions on the topics you’d like us to explore.
