July 13, 2021
n this post, I’ll be providing a step-by-step guide on how to “save” and “earn” on crvLUSD using the recently launched Element Finance.
Element is a decentralized protocol that allows users to obtain fixed-rate and variable-rate yield in the DeFi market, as well as trade between the two with high capital-efficiency. Element Finance recently launched on Ethereum (June 30th, 2021) with initial support for crvLUSD, the LP token for Curve’s LUSD+3Pool — they’ve since added Curve’s Tricrypto pool as well.
Quick Disclaimer: This tutorial is not a recommendation and interacting with new protocols can be risky. Element is experimental, please do your own research and use your best judgement.
Before you can interact with Element, you’ll first need to obtain crvLUSD. This is done by providing liquidity to Curve’s LUSD+3Pool. If you need guidance, here’s my previous tutorial on how to deposit to the pool. Otherwise, you can jump right in.
Now that you’ve obtained some crvLUSD, you’ll want to access Element’s homepage:
Feel free to browse around, but at first glance you’ll notice two options: Start Saving and Start Earning.
I’ll go in to more detail on how each option works in their dedicated sections, but for now this is what you need to know:
Saving: For casual and risk-averse users seeking to earn fixed-yield on their asset, start here.
Earning: For more advanced users seeking to take advantage of the underlying fixed-rate/variable-rate asset market, this is your playground.
If you’re looking to earn fixed yield (i.e. yield that won’t change up or down, but is guaranteed), click on Start Saving and the Save UI will open:
Here’s how it works:
In short, you’re purchasing a discounted version of your asset of choice called Principal Tokens and in exchange you’ll earn all of the guaranteed fixed-rate yield displayed upon purchase by the end of the selected term when you get back your initial asset. It’s that simple, cool right?
You may notice that the displayed fixed-rate may change after purchasing, but rest assured — this won’t affect you. The fixed-rate (APR) comes from the discount at which you purchased the Principal Tokens, so your APR will remain the same.
In the UI you’ll notice a few tabs:
Here, I’m opting to purchase ~508 crvLUSD Principal Tokens. Afterwards, all that’s left to do is wait until the maturity date (in this example, Sep 28, 2021). When the date comes, I’ll be able to redeem my Principal Tokens for my initial deposit + the earned APR.
Note: As displayed on the UI, there are no minimums, no withdrawal penalties, and you can exit anytime by selling your Principal Tokens. In that case, your actual yield will depend on the difference between the purchase price and the selling price.
After purchasing crvLUSD Principal Tokens, you’ll begin earning a fixed yield — i.e. the yield is guaranteed! In the last section, I’ll share a tip that could earn users additional yield on their Principal Tokens 👀
For the advanced users, it’s time to explore the Earn UI. You can do so by returning to the homepage and clicking Start Earning.
Under the “Earn” tab, you’ll see two maturity terms for the Yearn crvLUSD Vault. Click on your preferred term and the page will transform to this:
In contrast to earning fixed-term rates by simply purchasing the discounted Principal Tokens (Save), you’ll be opting to mint Principal Tokens, which represents your base principal, and Yield Tokens, which represent the variable interest gained from the yield generating protocol.
Having access to both tokens gives you more flexibility since you can provide liquidity or trade both tokens within the secondary market (AMM) built into Element. In addition, you’ll have exposure to the underlying variable-interest rate of the Yearn Vault which is often higher than the fixed-rate.
I’ll be minting 1000 Principal Tokens and Yield Tokens. At maturity, I’ll be able to redeem my minted Principal Tokens for the underlying crvLUSD and redeem my Yield Tokens that accumulated the variable-rate.
Users can stop here, but instead let’s explore the new opportunities that come with minting these tokens.
To find these other opportunities, you’ll want to click on the Trade tab at the top of the Earn UI.
I won’t be providing examples for this last section since there a handful of things you can do. Instead, I’ll break down some possibilities:
If you made it this far, you should have all the information you need to get started with Element Finance. To learn more, check out more Element resources here: