Some have asked me how something like @ArrowfarmOnRH / works, some have even spread false rumors etc - so I'm here to tell you in one post. If what I write doesn't make sense to you, please put it into your favorite LLM and tell it to summarize for you.

Arrowfarm is a "yield aggregator" - the way it works is by finding places where you can earn yield, and automatically compounding the rewards from those places such that you accumulate more of the underlying tokens you're already working with. In addition to that, for a period of time, it also offers an extra boost by emitting $arrowfarm tokens (0x416d0c4b431cfa33b4a4974e3dfc9f5089137148), which I'll elaborate on later.

It is modeled almost 1:1 after autofarm, which was an absolutel cook in the BSC season a few years ago, and which I called on my Twitter around $8 and it went to over $14000 per token and over $1.41 billion fdv. The emissions at arrowfarm replicate it, the style of the site does, the ability to get tokens early at very high apr, the fees, etc. The only difference I see is that it has a black background instead of white.

Before I go forward more on how it works, I want to clarify some misguided folks who have spread rumors and falsehoods. Because of the way arrowfarm is emitted, it is impossible to "bundle" it - the only possible way to get the tokens to begin with is by farming it, besides a portion of each block that emits directly to the team. The tokens that go into existence are from this "drip" which has a cap of 80k tokens over the course of a year. Thus the tokens that are put into the liquidity pool are those that are manually put there by people who want to farm that particular pool on the arrowfarm website. It's also why "LP isn't locked" - it can't be, because it's directly provided by users who want flexibility to remove as they please, of course. That's also why there's a 10x incentive to provide that LP, and apr is over 5500% right now on the website for this pool. Also, because all tokens come from the emission, anyone who claims from that emission (eg anyone who farms) is potentially gonna look like they are also in the same "bubble," even if they really aren't

Anyway, most people who have fudded or pointed to no locked LP or bubblemaps etc, just don't understand how this works. They're thinking about it as a launchpad meme coin or something, and it's just not the mental model that should be used here.

Because there will only ever be 80k tokens ever issued (and less on the market, since they are burned by the team from buybacks), the tokens are somewhat rare relative to what you see elsewhere, and they are emitted slowly, so many people choose to keep theirs instead of selling. More on that later.

How the autocompounding works: as an example, if you're supplying liquidity (LP) on Up33 in the eth/pons pool, what arrowfarm does it automatically take the $up rewards that are emitted and sells those half to $eth, and half to $pons, then adds the resulting new tokens to the LP you initially provided. This means your underlying eth+pons positions are made bigger, and you can compound faster theoretically. In addition to that, you earn the arrowfarm token as mentioned above, which adds an more apr% to each pool. Those combined reasons are why, for example, the eth/pons pool mentioned has over 4000% apr in it - which is a monster apr for providing LP.

So how does arrowfarm potentially go up in price? Well, each LP/stake compound that occurs behind the scenes of the website results in a performance fee going to the arrowfarm site. This performance fee is less than others from what I've seen, but high enough to be significant. When that fee is received, it is accumulated then those fees are used to purchase the arrowfarm token on the market - and so far, the devs have chosen to also burn those tokens. I assume this will continue.

This means that as tvl increases on the website, the earnings will also increase, and those buybacks will get larger and larger. The "game" here is reaching the point where buybacks outpace emissions. There's some math to where exactly in tvl numbers this hits, but I'll let you figure that part out.

Besides that reason, why hold arrowfarm? Well, if I were a betting man, and I may very well be one, it's almost certain that at some point or another there will be a profits share of part of the performance fee to those people who own arrowfarm. For now, I'm farming the LP pools, and accumulating more of the arrowfarm token as time goes on. My bet, and hope, here is that it even does a fraction of how well autofarm does - if that happens, there can be many millionaires made on this protocol.

🔍 Curated by @0xcaine_
✍️ Original thesis by @cryptogle
🔗 https://x.com/cryptogle/status/2105403252745613496