Splice Finance: Your Key to Superior DeFi Yields

This article was written by Gordian one of Mode's tech cooperators.

Introduction

In decentralized finance (DeFi), finding and utilizing the right platform to maximize your investment yields can be daunting, especially for beginners. Splice Finance aims to simplify this process by offering options between fixed APR and boosted points, allowing users to optimize their investments.

This article explores what Splice Finance is, how it works, and why it's valuable for both novice and experienced DeFi participants.

What is Splice Finance?

Splice Finance is a Decentralized Application (DApp) operating on the Mode Network. Splice provides users with the flexibility to choose between fixed yields (APR) or greater exposure to any capital stream accrued by the underlying accounting token, specifically leverage on native yield, or boosting point exposure. This dual-option system enables users to tailor their investment strategies according to their risk tolerance and financial goals.

How Does Splice Finance Work?

Splice Finance simplifies the DeFi experience through three core features: Markets, Portfolio, and Swap.

Markets

The Markets section allows users to explore various token options and their respective yields within Splice. Tokens such as wrsETH (Kelp), weETH (EtherFi), ezETH (Renzo), and MODE (Mode) offer unique yield rates and multipliers, which may vary over time.

Portfolio

In the Portfolio section, users can monitor and manage their investments effectively. It provides a comprehensive view of assets and facilitates informed decision-making based on financial objectives.

Swap

The Swap feature enables token exchange between yield tokens (YT) and principal tokens (PT). This flexibility allows users to dynamically adjust their investment strategies for fixed yields or boosted points.

Users can explore different yield markets, manage their investments, and swap tokens to optimize their returns. The platform supports various tokens, each with specific yield options and maturity dates.

What can you do in Splice Markets section?

Markets

The Markets section allows users to explore various token options and their respective yields within Splice. Tokens such as wrsETH (Kelp), weETH (EtherFi), ezETH (Renzo), and MODE (Mode) offer unique yield rates and multipliers, which may vary over time. Note, the following examples below offer an explanation of yield opportunities at the time of writing; they may not be available as quoted in the future.

Here’s an example explanation of the Market screenshot below:

• wrsETH (Kelp):

  • Fixed Yield APY (Annual Percentage Yield): PT tokens of wrsETH offer a fixed yield of 19.82% APY.
  • Points Multiplier for YT: YT associated with wrsETH has a points multiplier of 64.00x.
  • Maturity: This shows that the Tokens mature on 21st August 2024.
  • Liquidity: $164,038 represents the total liquidity available for trading the wrsETH token pair on Splice Finance.

• weETH (EtherFi):

  • Fixed Yield APY: PT tokens of weETH provide a fixed yield of 14.82% APY.
  • Points Multiplier for YT: YT associated with weETH offers a points multiplier of 126.00x.
  • Maturity: This shows that the Tokens mature on 21st August 2024.
  • Liquidity: $121,839 denotes the total liquidity available for trading the weETH token pair on Splice Finance.

• EZETH (Renzo):

  • Fixed Yield APY: PT tokens of EZETH have a fixed yield of 24.45% APY.
  • Points Multiplier for YT: YT for EZETH features a points multiplier of 104.00x.
  • Maturity: This shows that the Tokens mature on 21st August 2024.
  • Liquidity: $461,733 indicates the total liquidity available for trading the EZETH token pair on Splice Finance.

• MODE (Mode):

  • Fixed Yield APY: PT tokens of MODE offer a fixed yield of 76.53% APY.
  • Points Multiplier for YT: YT associated with MODE has a points multiplier of 20.00x.
  • Maturity: This shows that the Tokens mature on 21st August 2024.
  • Liquidity: $335,579 represents the total liquidity available for trading the MODE token pair on Splice Finance.

These would provide you a clear overview of each token's Fixed Yield APR, Points Multiplier for Yield Tokens (YT), and the liquidity available for trading on Splice Finance. It helps users grasp the yield options and market accessibility for each token respectively.

What can you do in the Splice Portfolio section?

Portfolio

In the Portfolio section, users can monitor and manage their investments effectively. It provides a comprehensive view of assets and facilitates informed decision-making based on financial objectives.

Swap

The Swap feature enables users to exchange their tokens for either yield tokens (YT) or principal tokens (PT). This flexibility allows users to adjust their investment strategies dynamically, optimizing for either fixed yields or boosted points and yield volatility.

How to Swap Tokens on Splice Finance

Swapping tokens on Splice Finance is an easy and straightforward process that allows you to either buy Yield Tokens (YT) or Principal Tokens (PT) easily.

To buy Yield Tokens (YT), start by choosing the token you want to swap, such as ezETH. Send your selected token to the swap contract, which will route Splice Yield (SY) from the pool. The contract then mints Principal Tokens (PT) and YTs from the SY, and you receive YTs. The PTs are sold for SY to balance the routed amount.

To buy Principal Tokens (PT), choose the token you want to swap, like ezETH or YT-ezETH, and specify the amount.

Approve the transaction to authorize the swap, then click the swap button to receive PTs.

Benefits of Swapping on Splice Finance

1. Efficient Yield Maximization:
   • Swapping allows you to efficiently acquire YTs or PTs, enabling you to maximize your yield based on your investment strategy.
2. Flexibility with your Investments:
   • Splice provides the flexibility to choose between stable, fixed returns with PTs or higher potential rewards with YTs.
3. No Liquidation Risks:
   • By participating in swaps, you can avoid liquidation risks that are common in other DeFi protocols.
4. Helps with Optimal Trading:
   • The relationship between PT and YT prices allows for optimal trading strategies, including flash swaps, which leverage the inverse price correlation for better returns.
5. Access to other Integrated tokens and Ecosystem:
   • The seamless integration of various tokens and yield options on Splice allows for a comprehensive and user-friendly trading experience.
6. Boosted Rewards and points both on both Splice, Mode and other ecosystem:
   • By becoming a liquidity provider (LP), you can earn additional trading fees and incentives, which helps increase your overall yields too. It also helps you get more Mode airdrop points.

What are the key tokens and concepts of Splice and how can you benefit with them?

What are Splice Tokens :

There are four types of tokens that make up a Splice market:

• Principal Tokens (PT): These tokens allow users to purchase at a discount to their fair market value on the day of maturity. This provides a fixed yield that buyers can rely on. Ideal for those seeking stable and predictable returns.

• Yield Tokens (YT): Offer leveraged yields during the contract term, diminishing to zero upon redemption but tradable prior to maturity. Perfect for users looking to maximize their returns through points.

• Standardized Yield Tokens (SY): These are the tokens received when minting yield tokens, exchangeable for underlying tokens on the Swap page.

• Liquidity Provider Tokens (LPT): Minters of these tokens receive both annual percentage yield (APY) and yield points, although both will be lower than PT and YT tokens individually. Additionally LPTs accrue yield through swap fees. Suitable for those looking to hedge against either consolidated strategy and earn global returns.

Splice Concepts:

• Fixed Yield APR: The Annual Percent Return for holding PT tokens, providing a clear and stable expected return.

• Boosted Points: Holding YT increases multipliers on points in addition enhanced variable yield exposure, potentially leading to higher overall returns.

• Maturity Date: The date when PT tokens can be redeemed for the underlying asset, marking the end of the yield accumulation period for YT token holders.

Strategies to Optimize Investment Yields on Splice (NFA):

• Free The Yield: All yield is streamed to YT until maturity, providing substantial returns through boosted points. This strategy is ideal for users looking to maximize their variable yield potential.
• Zero Price Impact Mode: Minting PT and YT tokens without affecting market prices, ensuring optimal trading conditions.
• Long on PT Tokens: This strategy focuses on maximizing fixed yields, providing stable and predictable returns.
• Long on YT Tokens: This strategy aims to maximize points and variable yield returns, suitable for users seeking higher but potentially more volatile returns.

What is the Yield Trading Concept?

Yield trading on Splice Finance involves buying and selling yield tokens (YT) and principal tokens (PT) to optimize returns based on market conditions and personal investment strategies. Here's how it works:

• Trading YT Tokens: Yield tokens accumulate returns over time and can be purchased for higher points multipliers. This makes them attractive for users who anticipate higher yield growth and are willing to accept higher volatility.

• Trading PT Tokens: Principal tokens provide fixed yields and can be traded for their stable returns. These tokens are ideal for users who prefer predictable and steady expected returns.

• Market Timing: Users can optimize their returns by strategically trading PT and YT tokens based on their yield forecasts. For instance, buying PT tokens when fixed yield APRs are high and selling them when the rates decrease can maximize returns.

• Yield Arbitrage Opportunities: Savvy traders can exploit price differences between PT and YT tokens across different markets, taking advantage of temporary inefficiencies to earn profits.

Why use Splice Finance?

Splice Finance stands out for its flexibility, optimization potential, and integration with multiple protocols which are:

• Mode Network: Helps to earn Mode points and leverage Mode’s ecosystem airdrop.

• EtherFi (weETH): Provides fixed and variable yield opportunities with EtherFi LRT’s tokens.

• Kelp (wrsETH): Enables yield generation through KelpDAO’s token ecosystem.

• Renzo (EZETH): Allows users to benefit from Renzo’s yield strategies.

When to Use Splice Finance?

• New to Decentralized Finance: If you are new to decentralized finance and want to try things out in yield farming with guided strategies, Splice offers you that freedom.

• Optimizing Yields: Suitable for maximizing returns through strategic investments and swaps.

• Portfolio Management: Useful for tracking and managing investment performance in a consolidated platform.

• Long-Term financial Investment: Suitable for users looking to generate sustainable passive returns through DeFi investments over the long term.

• Diversification of financial Investments: Aids in distributing your portfolio across different tokens and integrated protocols.

Getting Started with Splice Finance

1. Documentation , Tutorials and Guides: Access comprehensive guides at Splice Finance Docs.

2. Join the Discord Community: Join the Splice community for discussions and receive support on Discord.

3. Visit the Splice Website: Learn about the available markets and features on the Splice Finance Website.

4. Contribute to GitHub Repository: View the latest updates and contributions on GitHub.

Conclusion

Splice Finance empowers users to enhance their DeFi investments with strategic flexibility, whether they are new to the space or experienced. By understanding the Splice dashboard features, token concepts (YT, PT, SY, LPT), and optimal investment strategies, users can tailor their investments to maximize their returns accordant to their risk tolerance. Splice Finance also provides the tools, resources, and community support necessary to optimize your investments yields effectively.