Harvest Finance

Harvest Finance

Harvest Finance (launched August 2020) is a yield farming platform that farms the highest available yields from DeFi (Decentralized Finance) protocols. It has its own cashflow token with the ticker symbol $FARM. In October 2020, the total value locked (TVL) on the platform exceeded $1 billion.

In late October 2020, it was reported that the anonymous developers behind the project have an admin key that gives its holders the ability to mint tokens at will and steal users’ funds. The holders of the governance key would thus have the theoretical possibility of stealing all of the $1.05 billion in assets committed to the protocol, in addition to the funds in the Uniswap pool.

Background

0Harvest Finance's Total Value Locked (TVL), as of October 21, 2020.

Harvest Finance was launched on August 29, 2020, with the goal of maximizing returns for yield farmers by automatically allocating capital to DeFi protocols offering the highest returns. Their platform optimizes yields using the 'latest farming techniques. In their launch statement (posted to Medium), they explain,

Harvest Finance has a token with the ticker symbol $FARM, which has a supply of 690,420 FARM and is to be distributed throughout four years from its launch.

Around mid-October, Harvest Finance accumulated over $334 million in TVL. The following week from this milestone, its TVL doubled to over $704 million, ranking it as the seventh most valuable DeFi protocol, according to DeFi Pulse. As of mid-October 21, 2020, its TVL officially sits at over $1 billion.

Who and When Created Harvest Finance?

Chad Farmer

Harvest Finance was created by anonymous DeFi devs who were inspired by Andre Cronje, the founder of Yearn.Finance, for his ability to create such useful DeFi infrastructure. Following his lead, the anon devs created Harvest as a competing protocol to Yearn.

The Harvest protocol launched in 2020 when it opened for deposits on Monday, Aug 31st, and launched its FARM rewards for incentive pools on Tuesday, Sep 1st.

In just two weeks after launch, Harvest.Finance grew its community to over 8,500 members and reached over $500,000,000 in total value locked (TVL).

And the growth didn’t stop there.In just two months after launch on October 21, Harvest Finance surpassed $1B in total value locked (TVL) in its protocol

The explosive growth and success of Harvest Finance were unprecedented at the time.

Protocol

Harvest Finance's protocol design automatically farms the highest available yields and distributes the profits to users in the pool. Most assets are able to be farmed through the platform. If not, they will be readily available once 'respective strategies get developed.'

The incentives of participating in the platform's protocol include receiving the platform's native token: $FARM. Profits from the protocol are distributed to those who hold $FARM.

Token Distribution

Harvest’s $FARM token has not all been minted yet.

$FARM has a total supply of 690,420 FARM. The tokens are to be distributed from its launch (August 29, 2020), through four years. After its first four weeks, it has distributed 23555 FARM every week. Its distribution is split into three different categories.

• 70% towards liquidity providers
• 10% rewards for operational treasury
• 20% rewards for the Harvest Finance team

What is the Farm Profit Sharing Pool?

Harvest Finance’s Profit Sharing Pool is a pool where humble farmers (users) can stake $FARM tokens to receive a portion of 30% of the profits generated by the LPs. The number of $FARM stakers receive from this pool is proportionate to their stake in the Profit Sharing Pool.

Where does the 30% come from?

While 70% of the profits made from Harvest’s automated yield-farming protocol are distributed to depositors, the other 30% of profits is used to buy $FARM tokens directly from the market en masse. These $FARM tokens are then distributed proportionally to stakers in the profit share pool.

The Profit Sharing Pool not only benefits $FARM stakers in the pool, it benefits every single $FARM token holder. This is because Harvest must buy $FARM en masse from the market and this buying pressure further reduces the available $FARM supply and pushes up the price as a result.

Moreover, in addition to funding the Profit Sharing Pool with 30% of the profits generated by LPs, the pool also receives weekly $FARM emissions from the total supply of 690,420.

What are fTokens Used For?

fTokens, tokens with an “f” in front of them like fDAI, fUSDC, and fWBTC are the yield-bearing versions of these assets which are being automatically farmed by the harvest algorithm. These tokens automatically appreciate and can be redeemed for their real, underlying asset (ie. DAI, USDC, WBTC, etc) at any time.

How is Harvest Finance Governed?

Harvest Governance Proposals

The day-to-day running of Harvest Finance is run by Harvest devs. The devs make important decisions on things like incentive distribution, strategy deployment/updates, addition/removal of vaults, etc. There is no pure form of a DAO yet.

However, Harvest’s governance isn’t solely run by devs. The Harvest community of $FARM token holders has a voice and voting power for various higher-order strategic decisions. All Harvest governance polls in which $FARM token holders can participate can be found here

Some Harvest governance proposals in which $FARM token holders have participated include:

• The restructuring of the emission schedule
• The decision to issue GRAIN as reparations after the October 2020 exploit
• The decision on the percentage of GRAIN buyback program
• Harvest grants for the Ethereum ecosystem
• More

Controversy

On October 23, 2020, CoinTelegraph reported that Harvest Finance has an admin key that gives its holders the ability to mint tokens at will and steal users’ funds. As noted by auditing companies PeckShield and Haechi and highlighted by Chris Blec, a DeFi community member, the governance parameters are not set by a contract with clearly defined rules. An admin key, presumably held by the anonymous developers behind the project, could be used to arbitrarily mint new FARM tokens. This power could allow the governance key holders to create an unlimited number of tokens and drain funds in the token’s Uniswap pool, which holds $12 million in USD Coin (USDC) as of mid-October.

Haechi highlighted that in addition to the minting mechanics, the governance key holder has the ability to change the vault functionality at will, which could be exploited by submitting a bogus strategy that simply sends the funds to an attacker-controlled address. The holders of the governance key would thus have the theoretical possibility of stealing all of the $1.05 billion in assets committed to the protocol, in addition to the funds in the Uniswap pool.

DeFi investor Tetranode, who allegedly invested 1% of his portfolio in Harvest, requested that the project include a 12-hour lock dashboard. Hence, users would be able to exit their positions within the lock-in period if the developers introduce any dubious changes.

In response to the audits, the Harvest Finance team introduced a 12-hour time lock that should give enough advanced warning to users if any foul play is detected however this requires constant community vigilance.