Honeycomb: how to stake and farm tutorial, benefits and risks

Hello fellow Bees,

We have a great new feature in the 1Hive ecosystem, the Honeycomb aka HNY Farming!

Update: the farm is open, and the first farms are funded!.
You can now farm and earn HNY in the farm! At the moment of writing this, 3 farms are now open for farming.

(You can also already provide liquidity and stake your LP-tokens in any of the other farms -see instructions below- but you will not start earning until they are funded as well).

As many might not know how “yield farming” actually works I will create and update this topic with backgrounds, instructions and updates. I have split it into separate posts for clarity and easy linking to them.

#1 What is (yield) farming?
#2 Where can I farm Honey?
#3 What are LP tokens, how do I get these and what can I do with them?
#4 How do I farm? Instructions:
#5 What are the risks?
#6 Staking mini FAQ

You can discuss on the new #honeycomb channel on discord as well:

(this is now about finalised, but I am still updating this constantly)

43 Likes

#1 What is (yield) farming?

Please refer to this external article to read basic info and backgrounders. Takeaways are:

  • Yield farming is the process of earning a return on capital by putting it to productive use
  • Money markets offer the simplest way to earn reliable yields on your crypto
  • Liquidity pools have better yields than money markets, but there is additional market risk
  • Incentive schemes can sweeten the deal, giving yield farmers an added reward

There is a lot of useful info on this page as well.

Why would you ‘farm’?
One main reason: To ‘harvest’ income!
Most farmers farm because of ‘yields’. If you stake your Liquidity tokens (¿Qué? -> Explained below!) you will normally be rewarded.

In a physical world this ‘yield’ would mean corn, yams, grapes etc. In our virtual world, this means virtual harvests, which can be virtual yams, sushi, burgers and… Honey!
Either you earn more of the token you supplied, or you might even get a completely new token as a reward.

Of course most are not interested in digital coins that represent virtual foods (unless you are in ‘NFT’s’), so these virtual foods are then traded for cold hard (digital) cash.

What are the risks?
It’s not just free Magic Internet Money. There are opportunities, but also several risks and pitfalls and it is important to be aware of these. I will discuss these in a separate post below.

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#2 Where can I farm Honey?

The new HNY Farm is called Honeycomb and can be found here: https://hny.farm/
https://hny.farm/

Notes:

Beware of scams and fake sites!
Make sure you always check the site you are on:

  • Notice anything different/weird? Don’t use it.
  • Doesn’t the site have a ‘lock’ (https) in the address bar? Don’t use it
  • Did you find the farm via Google? Don’t use it.

When in doubt, ask on the Discord, and even then, be cautious as to who answers you.

These are all signs of a fake site. This happened A LOT with Uniswap and it will only be a matter of time before it happens with HoneySwap and the Honeycomb farm. If you ‘deposit’ liquidity, ‘swap’ or ‘stake/farm’ on a fake site, you will very likely not only lose the tokens, but might lose everything that was in your wallet.

Just type/bookmark hny.farm and go there directly.

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#3 What are LP tokens, how do I get these and what can I do with them?

What are LP pools?
On Honeyswap, tokens can only be swapped against other available tokens, but Honeyswap does not create these. So, in order to be able to swap, there must be ‘liquidity’ which means ‘a sufficient amount’ of tokens; these must therefore first be deposited by so-called ‘Liquidity providers’ in so-called ‘Liquidity Pools’.

Why would I add liquidity to a pool?

  1. To earn fees -> A small percentage is charged over every HoneySwap transaction, the swap fee. These fees are divided pro-rata over the Liquidity providers. Depending on the exact pool, the tokens, the total liquidity and growth and your share this could generate anything from close to 0% to sometimes over 100% APY (Annual Percentage Yield)
  2. To help jumpstart a project. Often project owners/teams supply a certain part of their native token in 1 or more pools. The first liquidity will determine the first price and from there the market can grow. But you do not need to be a project owner or a whale, even small contributions create a more stable value and make sure that trades can go ahead without much ‘slippage’: one trade will not influence the price much if there is sufficient liquidity.
  3. To hedge against loss of token value. This will be discussed further below in the ‘risks’ section, but basically the idea is: if one token in a pool changes value relative to the other, your capital will change accordingly, but not in the same amount. This can create a slight opportunity cost ('Impermanent Loss), but can also help in soften losses. More below.

Honeyswap only has 50/50 pools
There are different ways of defining pools, but as HoneySwap is based on Uniswap we are limited to ‘50/50 pools’. This means that in order to add tokens to the pools, you must add a pair of tokens at the same time, equally divided (ergo 50/50) so with the same value of each half of the pair.

So if 1 HNY is worth $800, and you want to add 0.1HNY ($80) to the HNY-xDai pool, you must combine this with $80 worth of xDai.
Honeyswap (https://honeyswap.org/#/swap) is the 1Hive decentralised token exchange, where you can exchange (‘swap’) different tokens, like xDai for HNY, STAKE for HNY etc.

If you look at the Honeyswap page, you will see the 2nd tab, with the word ‘pool’ (slightly greyed out). If you click that, then you go directly to the heart of the swapping, the ‘pools’!

How do you add liquidity to the pools?

We’ll use the HNY/xDai pool as an example as that one will be the largest, but the following is valid for all pools.

  1. First of all, you must have funds in your wallet. If you already have both sides of the 50/50 pair you want to add liquidity to, then you can go to step 3
  2. If not, then you need to buy 1 or both coins. Fortunately, this can be done quickly and cheaply using Honeyswap. Note that if you want to add $100 in liquidity to the pool and you already have $100 in xDai, you should only use half of that to buy HNY as you need equal parts.
  3. Click on the ‘Pool’ tab on Honeyswap, or go directly to https://honeyswap.org/#/pool
  4. There is a big button saying “Add Liquidity”. Click that
  5. You’ll see a new screen where you can select the token pair you want to add liquidity to. Sometimes the last used token(s) are already selected, if not, click on ‘select a token’ and choose the token you want. Then do the same for the other one. See also this miniguide about how to find your pool if you can’t, separate topic.
  6. Choose the amount of one of the tokens you want to add and the corresponding amount for the other token will automagically get filled, based on current exchange rate.
    You can also click ‘MAX’ on either side, though that will only work on the side where you have the least value in your wallet (or if both $ USD values are exactly the same at that moment). That way you will use all of your tokens.

Important! Don’t click ‘max’ on the xDai side. If so, you will pool all your xDai. This might work as there might still be enough dust left to complete the pooling transaction, but you might not be able to do anything else without adding new xDai to your wallet. So, always leave a few xDai.

Underneath the pair you will see the exchange rate (both ways) as well as your share of the pool after you deposited the tokens.

  1. you might need to approve 1 or both tokens first, Honeyswap will tell you and you will need to sign 1 or 2 messages with MetaMask. If you have already approved these coins before (for swapping for example), you can click “Supply” and a confirmation screen with all numbers will come up, so you can do a final check before confirming.
  2. You will get a new MM request, it will be cheap and fast because you are on xDai!
  3. After the deposit is made you will receive the LP tokens in your wallet. Also, if you go back to the pool page, your LP tokens and pool share should show up (even if you do not see them in your wallet, see below -> ).

Your receipt: the LP tokens
This is the same for all pairs. HoneySwap will give you a new token in return, so called UNI-LP tokens, short for Uniswap Liquidity provider tokens, which is sort of a receipt.

These LP tokens can be transferred to other addresses, but be careful with them, as without them you cannot take your deposited coins back out!

You might very likely not see them when you check ‘assets’ in MetaMask, but don’t be alarmed! They are there, just not visible. You need to add a Custom Token (scroll to the bottom of your asset list, click ‘Add token’, then ‘Custom Token’ and add the address of the token pair you LP’d to.

The current list of all pairs can be found here: https://info.honeyswap.org/pairs
Click your pair, for example, HNY/wxDai will take you to https://info.honeyswap.org/pair/0x4505b262dc053998c10685dc5f9098af8ae5c8ad
Copy that last part ( 0x4505b262dc053998c10685dc5f9098af8ae5c8ad ) and add this in the custom token top field. The rest will populate automagically, click confirm and you should see your shiny new LP tokens!

And guess what? You can use these to farm even more Honey!

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#4 How do I farm? Instructions:

Ok, if you have read the above about pooling and the section below about Risks (do it if you haven’t done so), then it’s time to roll up your sleeves and get to work!

There are several steps and possibilities I will try to describe them all here, with screenshots. Click on them for larger versions.

  1. Go to hny.farm (remember don’t Google for it and re-check your browser for a correct address). You will see the following, though the warning banner will have disappeared once the Farm is operational.

  2. As you can see some things are ‘locked’. That doesn’t mean it isn’t working, but that your wallet is not connected to it. If you click on Farm (don’t bother with Create Farm, it is not very useful at this moment) in the top menu you will see this locked screen:


    This is quite intuitive, as it actually tells you what to do: “unlock your wallet”. Just click that button with the closed lock and this screen should pop up:

Note that your MetaMask should already be on the xDai chain and on your correct account (where the LP tokens are). If you are still on ETH main net it will do (currently) do absolutely nothing when clicking, not even give you an error message. So if that happens, click ‘cancel’, change to xDai in MM and try again.

  1. You don’t need to sign a message, you will just be connected now. Note that you need to do this every time you refresh any page in the farm.

Now the farm pages look a lot more interesting!
The home page should look like this:


It will show the following:

  • Your Honey Balance: this is what is already in your wallet
  • Total Honey supply: this is the amount of Honey in existence. As it is currently an inflationary asset, this will increase over time.
  • Pending Harvest: the amount of Honey that can already be claimed (‘harvested’) on the Farm page.
  • Explore the Honeycomb: This button will take you to the farm page (just like the top menu link ‘Farm’ does).
  1. If you go to the farm page, you will see it has changed as well after connecting your account:

Note that this screen will very likely change quite a lot as not all farms will be there when we go live, others might be added etc not all might be funded etc…

As you can see, once the farms are live they show some numbers, at this moment the Daisy farm shows:

  • APY 281.50%: This is the current return on investment, annualized
  • 299.197 HNY: The total amount of HNY available in the pool. We started with 300HNY for this one and it will go to zero in 30 days.
  • 19,491.571 LP: The amount of Liquidity tokens currently staked here.

See the mini-FAQ below for more details about the APY, and about which pools/farms to choose.

There will be at least 3 farms to start with. Let’s see how we can farm the largest pool, HNY-xDai:

Click ‘Select’ and you will go to the Dai Daisies farm:

  1. There are 2 parts:
  • The left side will show you how much HNY you have earned. This number should rise every 10 seconds or so, but of course it depends if you have staked something, and how much as smaller stakes will generate little HNY and they will not show up until they reach 0.001 (a bit less than $1 at the moment of writing).

  • The right side is where you start farming. When you begin, the number of tokens staked - shown under the bee- will be zero. So you cannot unstake anything and that button will therefore be greyed out.

Important: The ‘funding’ adress that is mentioned is just an internal intermediate address to fund the farm. Do NOT send any funds/ (LP) tokens there as they will be lost, we cannot retrieve them.

The magic starts to happen when you click the small “+” button. This will generate another pop-up:

You can see I have a bit under 15 LP tokens that can be used for this Farm. You can enter the amount of those that you want to use for farming (=staking) manually, or if you want to stake all that you have, just click ‘MAX’ and the total amount will be filled.

  1. A MetaMask/wallet pop-up will appear as you need to approve the transaction:

    You don’t have to change anything, just click confirm and the staking will be approved and you are now farming Honey!

The amount staked should now show under the bee and the HNY earned amount should slowly start rising, depending on your stake, available HNY in the pool and the amount and stake size of others in this farm.

  1. Once you have generated/farmed some HNY you can harvest it!
    Just click the ‘Harvest’ button -> select the amount, another MetaMask pop up will appear and once you confirm your freshly farmed HNY harvest will be in your wallet!

  2. If you are done farming, you can unstake (part of) your LP tokens, just click the unstake button, select the amount of LP-tokens you want to unstake and confirm.
    Note that you need to harvest your rewards separately, this does not happen simultaneously.

Once unstaked, you will still have your LP tokens and still earn trading fees on them. If you want to access the underlying tokens, you need to remove them from the liquidity pool again:

  1. Note: The amount you can harvest will also be shown on the homepage, but that is the total over all farms you have staked in. So if you only farmed one, it will be the total for that farm, else harvests from other farms will be added. You can’t harvest from the homepage though, so you will spend most time on the farms and farm detail pages.

  2. Note: You can pool, unpool, stake, claim, unstake, switch between farms as much and often as you like. In ‘regular’ Yield Farming this is not very efficient due to the high gas fees, but as the HoneyComb is on xDai, you don’t have to worry about it!

Happy Farming! Let me know here or in the #Honeycomb channel on Discord if you have any questions. If this guide or any other guide on the forum helped you, please leave a ‘like’ as it helps the content creators.

14 Likes

#5 What are the risks

So staking and farming should be a no-brainer?
It would seem that there are only upsides to pooling and staking/farming, right? Well no, there are definitely risks and possible downsides as well:

  1. Smart contract issues: the Honeyswap pool is a fork/clone of the Uniswap pool. The original has been audited, ours hasn’t. In any software product and smart contract can be bugs, some of them so severe that you could lose everything. Never farm/pool more than you are prepared to lose.

  2. Bad team/rug pull risks: there have been several fly-by teams that did a 5-minute fork of Sushiswap, had people pool and stake their funds and then did a rug-pull.
    What’s that? Literally, it is “*A sudden revelation that completely contradicts the assumptions one has been led to believe.”

That’s the nice version. In DeFi it is normally more extreme, the devs/owners can create a backdoor in the contract, mint unlimited tokens and thus dump all of these in the pools and drain the entire pool.
Check out this excellent explainer video:


In short: if you don’t trust the team, don’t trust the farm and don’t stake more than you are willing to lose.
  1. Impermanent Loss (IL). Ok, now you have a nice team like 1Hive, a great pool and farm and you are staking your LP tokens. After a while, you need your funds and you withdraw and get much less than you put in, either token A, token B or both. Or you lost 20% of token A, but got 10% more of token B?!? What happened?

This is called Impermanent Loss or IL. Likely one (or both) of the 2 pooled and staked tokens have changed in value since you started staking. What the pool does is rebalance your holdings automatically.

So in a way, this protects you from crashes of one of the 2 tokens. But on the other hand, this also creates a situation where you don’t get the profit you expected if one of the coins started mooning as you will have fewer of the higher value coin than you put in. This opportunity cost is called IL.

It’s impermanent as if you leave the pool as it is and the prices return to their former levels, there is no loss at all. Here is a good in-depth explainer, here is another excellent one with examples and graphs and here is an online IL calculator that lets you check your IL based on hypothetical price movements.

  1. Transaction fees are higher than profits. In ‘normal’ ETH mainnet pools and farms it is really expensive to start farming. Usually, you need to approve tokens, pay for the pooling, pay for the staking.

But many forget that when your farming adventure ends, or you want to switch to another pool/farm, you need to do everything in reverse to get your funds back: unstake your LP tokens, remove liquidity and maybe trade one for the other coin.

Most of these transactions are far more intensive and therefore expensive than regular ones. And if your farm is popular, gas prices for a regular swap might already be through the roof, which can create pooling or staking costs of many dozens to hundreds of $USD.

The good thing is that our HNY Farm is on the xDai chain and therefore basically without any real fees, so you can pool, stake, switch, claim, unstake and remove liquidity nearly for free! This will make farming much more dynamic as farmers are no longer restricted by excessive mainnet fees.

So though the entire fees problem is a risk for regular pools/farms, it’s not a limiting factor for us and whales and small farmers have the same chances.

  1. User error: As with any decentralized smart contract interaction you can make mistakes, and most cannot be easily fixed as the contracts are executed automagically. Think twice before doing anything with regards to smart contracts. Read guides like this - and double check them as these can also be wrong/outdated! - and check the help channel before you make a mistake.

As mentioned above: –> In any software product and smart contract can be bugs, some of them so severe that you could lose everything. Infomation can be wrong and you can make mistakes. Never farm/pool more than you are prepared to lose <–

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Here is a new Staking mini FAQ, with Q&A’s from the Discord. Feel free to add more below and we can add the answers here as well:

  • Can we stake in different pools from the same wallet? -> Yes, no problem at all.

  • Do we still earn trading fees when we stake our LP tokens? -> Yes, see also this message above.

  • Help! I staked my LP tokens and now my liquidity is gone! -> Nope, it’s still there, you just temporarily moved them to the staking contract, that’s why it states you don’t have any liquidity in the pool.
    Once you are done farming and unstake them, they will show up as liquidity in the pools again.

  • Is the farm open? -> Yes, the farm is open and the first Farms are funded!
    You can stake in other pools that are not yet funded already, but until the proposals to fund those farms have passed, there won’t be any HNY to harvest, so there is enough time to prepare, pool etc.

  • Help, I see a blank screen when going to the farm! -> This is usually an error because of the RPC in your MetaMask. You can first try to do a hard refresh/F5. If that doesn’t work, you can first check if your xDai network has this RPC: https://xdai.1hive.org/ . If not, changing to it might work. If not, please go to the Discord Help channel, so we can help you quicker. Note: when adding the xDai RPC, the Chain ID is NOT optional, even though MetaMask claims so, so do add “100” in that field.

  • Which pool/farm should I choose? -> Most sensible thing would be to join the pool that can be farmed with the highest APY, as this means it gives the highest returns. Note that the APY depends on the amount staked by everyone, so the moment you or anyone else adds to the pool, it will go down a bit. This way it normally evens out between the pools, so don’t worry if you have staked your LP tokens in a farm that has a lower APY, it will belance itself out quickly.

  • But what is APY? -> It means Annual Percentage Yield, or the relative increase in value if you leave your stake for a year, but based on the tokens not changing in price and the total amount of pool funding and total LP staked not changing. So it is more a theoretical number as it will go down quickly normally, but it can give you an idea of current possible profits.

12 Likes

thanks a lot man, this list of resources is very much appreciated!

I have one question (very noob): once we start providing liquidity, we get LP tokens. As you said:

How can honeyswap know on which pair I provided liquidity if all pairs give the same UNI-LP token?

thanks!

1 Like

Hi, thanks for your comment, much appreciated.

No, actually the UNI-Lp tokens are all different, every pair has its own contract address. But unfortunately, MetaMask doesn’t show the name, so you can have several different LP tokens in your wallet that all have the same name. But the HoneySwap pool tab immediately recognizes them for what they are, based on the contract address, which is unique.

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Great thread harry. Can you do a TLDR on difference between just adding liquidity to pool and getting those fees e.g. xdai/honey liquidity, and then staking the LP tokens? Where do the fees come from beyond your share of the trading fees when you have added liquidity?

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Great post!! thanks!
very informative

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thanks you for the tuto, i will try when i will receive my first HNY

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Awesome, and very timely too.

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Hi @cryptoclip, thanks for your comment.

  • When adding liquidity you earn your pro-rata share of the trading fees, based on the # of LP tokens you own divided by the total LP tokens issued by the pool.
  • When adding (staking) your LP tokens to the farm, you earn a share of the funds that are in that farm, also pro-rata, but likely much more dynamic as it’s so easy and cheap to add/remove funds.

The farms get supplied by funds by the DAO, there will be separate proposals at certain times (not defined yet) to add x amount of HNY to the farms, which are then divided to the farmers over time. So there are many factors that decide how much you will earn. Could be a lot, could be a little as well:

honest

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Thanks, perfect explanation. From that I can tell the part I was missing / misunderstanding was where to the funds come from for the farm, if they are not from the fees.

When you stake your LP tokes to the farm, do you stop getting fees from the liquidity pool? Or you then get the fees AND the farming rewards on top of that

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very nice! thanks for putting up a guide before launch to get everyone on the same page!

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Great article! I love the level of details. Thank you for putting all this together.

I was a bit confused about farming, thanks for clarifying few things!

Hi @cryptoclip

As far as I know, you will earn both. Even though technically your LP-tokens are not available anymore as they are staked in the farm, you did not remove liquidity.

Every LP token increases in value due to the addition of fees, so once you are done staking, you still have the same amount of LP-tokens and these should have gone up in value while farming as well.

1 Like