In this guide we will explain how to provide liquidity to Polycat vaults on the Polygon network to earn swap fees and yield farming rewards that are auto-compounded.
What is Polygon?
Polygon is a scaling solution for Ethereum with fast and cheap transactions. It is a seperate blockchain with different features and parameters which requires moving funds across a “bridge” to get on the Polygon network. The Polygon network uses different technologies than Ethereum Layer 1 so it has a different security model and is able to have lower transaction costs.
What is Polycat Finance?
Polycat is a value-oriented, sustainable and decentralized hybrid yield optimizer (AMM and yield aggregator) running on the Polygon blockchain. Launched in May 2021, Polycat Finance was one of the first yield farms on Polygon. Some of their features include the Polycat AMM, Stake & Earn, Vault & Compound with a strong focus on security. The base code has been audited numerous times and they are using the most secure, audited and battle-tested code, to better protect user funds.
What you will need to provide liquidity on Polycat
- Metamask wallet
- MATIC tokens in your Polygon wallet for gas
- LP Tokens to deposit into the vaults (or tokens you can use to swap into the tokens needed for a given vault
Setting up the Polygon network with your Metamask wallet
First, you will need to configure your Metamask wallet to connect to the MATIC network. You will need to open Metamask and click on the Network selection dropdown and then click on Custom RPC.
Fill out the empty fields as shown in the picture above and click on Save. You will be directly switched to Matic’s Mainnet now in the network dropdown list. This process adds the MATIC network to the list of available networks you can switch to from within Metamask. Sometimes it is helpful to switch networks when Metamask is acting strange or if you are having trouble getting things to show up.
Here is the list of the parameters so you can easily copy them:
- Network Name: Polygon Mainnet
- New RPC URL: https://polygon-rpc.com/
- Chain ID: 137
- Currency symbol: MATIC
- Block explorer URL: https://polygonscan.com/
Move funds from ETH network to Polygon/Matic network
The Polygon Wallet interface has a section labeled “Bridge” and it will bring you to the interface pictured above. Once you have moved funds over to the Polygon networks you can manage them from the same Polygon Web Wallet interface .
Finding the right Vault to provide liquidity to on Polycat
Polycat has a variety of options on their platform ranging from vaults that require LP tokens from an AMM to deposit to single asset vaults that only require depositing one type of token. You can use the filters at the top of the page to narrow your selection by a few different criteria like which AMM platform the LP tokens are from or which types of assets you are looking to stake. You can also sort by vault APY or TVL to get a sense of what is popular or performing well currently. You will also notice that above the area where it lists the token required for the vault, it tells you what form the rewards will take. It can be a single token or an LP token depending on the vault.
Platforms: Aave, ApeSwap, Curve, DinoSwap, Dfyn,Firebird, IronFinance, QuickSwap, SushiSwap, Wault
Vault types: Single Asset, Stable only
Steps to add liquidity to Polycat vaults
Step 1: Identify which vault you would like to deposit to and make sure you have either the single token or LP tokens needed to deposit. For more info on how to add liquidity to AMM’s to get the LP tokens, you can check out this article that offers a guide on supplying liquidity to QuickSwap. For this example we have chosen the WMATIC-USDC LP vault.
If you do not have the LP token, you can use the “Get WMATIC-USDC LP” link highlighted above to swap into the tokens needed for this vault. Once you have the 50/50 proportion of both tokens you can then use the “Add Liquidity” link to deposit the tokens into the AMM (Quickswap in this example) liquidity pool to get the LP tokens needed. The process for adding liquidity can vary from protocol to protocol, check our blog archives for guides on how to use many of them.
Step 2: For this vault, you will first need to go to QuickSwap and add liquidity to the WMATIC-USDC pair to get the LP tokens you need for this vault. You do NOT need to stake those LP tokens on QuickSwap as Polycat will be doing that for you.
Step 3: Click the “Approve” button and confirm the transaction then you will get an option to “Deposit” as pictured below. You will notice each vault comes with a set of fees, this particular vault charges no deposit fee but a 0.1% withdraw fee so be sure to factor that into your decision.
Once the deposit goes through you will see the balance information reflected on the “Withdraw” side of the UI.
Polycat has a new feature for vaults for user initiated compounding (highlighted below).
Due to rises in gas prices on the Polygon network, Polycat implemented this Compound feature so a single user can initiate the transaction to compound all of the rewards for everyone in the vault. The estimated gas costs are shown with the compound bounty and whenever the bounty surpasses the gas users are rewarded for helping out!
Tracking Your Position on APY.vision
First time APY.vision users – enter your Polygon address in the box highlighted above. On mobile/tablets click on the search icon and copy their address into the popup
Once your vault position is deposited and auto-compounding on Polycat, you can start tracking the performance of the vault. APY.vision will separate the liquidity pool (WMATIC-USDC) activity from the vault activity (the auto compounding) as shown below.
How to withdraw and what to expect
One important thing to note is that different vaults have different fees associated with deposits and withdrawals. The vault we are using has no withdrawal fees, but there are some that do.
When you are ready to pull your liquidity from the vault, enter the amount you wish to withdraw and hit the “withdraw” button and your LP tokens will be back in your wallet. To exit the liquidity pool entirely, you will have to go back to the AMM where you entered into the pool to get your tokens back. Note you only need to do this if you are in a vault using LP tokens, a single asset vault will not require these extra steps.
Providing liquidity is a great way to earn some income on tokens sitting in your wallet. You do have to be careful when providing liquidity, as sharp price increases or decreases can have a huge impact on the performance of your position. To read more about the risks, we highly recommend reading this post. We suggest using APY.Vision to keep a close eye on your positions to know when to remove liquidity during times of extreme price volatility.
APY.Vision does not give investment advice and always insists that you do your own research. Read our full Legal Disclaimer.
Check out APY.Vision!
APY.Vision is an advanced analytics tool for liquidity pool providers and yield farmers. If you’re using any DEXs, AMMs, or liquidity pools this is the tool you will need to easily track the ROI of your liquidity provider and yield farming activities. Try it now!