nirholas Yield Farming Analysis
When to use this skill
Use when the user asks about:
- Evaluating yield farming opportunities
- Comparing DeFi yields across protocols
- Assessing farming risks and sustainability
- Calculating impermanent loss for a token pair
- Finding the best yield for a given asset or pair
Analysis Framework
1. Opportunity Overview
Gather and present:
- Protocol name, chain, and deployment history
- Pool composition (token pair or single-sided)
- Current APY/APR with base vs incentive breakdown
- TVL (Total Value Locked) and recent trend
- Pool age and historical APY stability over 7d, 30d, 90d
2. Yield Breakdown
Decompose the advertised yield into:
- Base trading fee APY — derived from actual volume
- Incentive token APY — farming reward emissions
- Compounding frequency — auto-compound available?
- Sustainability check — review emissions schedule, token inflation rate, and runway
- Comparative yield — how does this compare to similar pools on other protocols?
3. Risk Assessment
Evaluate each factor systematically:
| Risk Factor | What to Check |
|---|---|
| Smart contract audit status | Audited by reputable firm? Multiple audits? |
| Protocol TVL trend | Growing, stable, or declining over 30d? |
| Token emission schedule | Inflationary pressure on reward token? |
| Impermanent loss exposure | High volatility pair or correlated assets? |
| Admin key risk | Multisig with timelock? Or single EOA? |
| Oracle dependency | Which oracle? Redundancy? |
| Liquidity depth | Can the user exit at size without significant slippage? |
| Chain risk | Bridge dependencies, L2 sequencer risk? |
4. Impermanent Loss Estimation
For the given token pair, calculate IL scenarios:
- Retrieve current price ratio between the two assets
- Pull historical volatility (30d and 90d)
- Compute correlation coefficient if data available
- Present IL at these price divergence levels:
- ±10% divergence: ~0.11% IL
- ±25% divergence: ~0.6% IL
- ±50% divergence: ~2.0% IL
- ±100% divergence: ~5.7% IL
- Compare estimated IL against yield to determine net profitability
5. Output Format
Provide a structured recommendation:
- Protocol: Name and chain
- Pool: Token pair and fee tier
- Current APY: X% (base Y% + rewards Z%)
- Verdict: Strong / Moderate / Weak / Avoid
- Expected net APY: After estimated IL
- Risk level: Low / Medium / High / Very High
- Suggested allocation: Percentage of portfolio (never more than 10% in a single farm)
- Minimum lock awareness: Any withdrawal fees or lock periods
- Exit conditions: Specific triggers for when to withdraw (reward token drops X%, TVL drops below Y, APY falls below Z)