A Deep Dive into Arbitrum Yield (xARB) Index

The decentralized finance (DeFi) industry has completely changed how many people access financial services such as lending, borrowing, and trading globally. By removing the need for banks or brokers, DeFi platforms allow for faster, more lucrative, and accessible transactions.

Amid the fray, one project that has helped democratize the DeFi arena is Rivo. By offering investors access to several high-quality ‘indexes,’ it serves as an ideal point of entry into the rapidly expanding crypto economy.

The Arbitrum Yield (xARB) index is particularly noteworthy in this regard, allowing investors to accrue stable interests while mitigating many risks (like volatility) typically associated with the crypto market. Not only that, it minimizes the need for users to possess any technical knowledge about the space.

In this article, we will look at the xARB index in detail, examining its design, underlying assets, risks, opportunities, and much more. 

What is the Arbitrum Yield Index (xARB)?

Consider an individual who wants to start a farming venture. One option would be to buy a tract of land, choose the right seeds, till the soil, water the crops, and hope for a good harvest. The entire process, however, is not only time-consuming but also requires an immense level of expertise.

Alternatively, the individual could join a farming cooperative where a group of experienced farmers manages their land, chooses the best crops, and takes care of all the other nitty gritty. By contributing to the cooperative, the individual can share in the overall harvest without having to do the hard labor or make crucial decisions.

The Arbitrum Yield Index Vault, or xARB, works somewhat similarly, allowing users to pool their capital with others while having experts manage a diversified portfolio of DeFi assets for them. 

Rather than engaging in individual yield farming strategies, xARB allocates out an investor’s capital into high-yield DeFi tokens such as GMX, GNS, and JOE. To elaborate, GMX is a decentralized exchange (DEX) specializing in perpetual futures and offering deep liquidity for leveraged traders, while GNS (Gains Network) is another prominent player in the leveraged trading space. Lastly, Trader Joe’s (JOE) is a DEX offering innovative liquidity provision models. 

By staking the native tokens of the aforementioned platforms, investors can contribute to the liquidity pools while earning protocol fees in various popular assets (including USDC).

Lastly, unlike traditional indexes that passively hold assets, xARB actively participates in protocol staking, generating consistent yields from its underlying projects — allowing investors to earn protocol fees (like dividends) and compound their returns in a completely decentralized, non-custodial manner.

Why choose the Arbitrum Yield Index?

• (i) One-click access to lucrative DeFi opportunities:  For retail investors, navigating individual protocols can be highly daunting. However, with xARB, users can access top-tier Arbitrum-based offerings without needing to stake assets on each platform manually. The index aggregates capital and automatically distributes it among different strategies, making it a one-stop shop for one’s DeFi needs. 
• (ii) Balanced allocations: xARB consists of several well-performing, low-volatility (including GMX, GNS, and JOE), thus mitigating several risks typically associated with overexposure to single asset offerings.
• (iii) Active Yield Generation: Unlike passive index funds, the xARB Vault actively engages in yield farming and staking, compounding returns for investors. By leveraging the revenue generation capabilities of the underlying protocols, xARB creates an additional stream of income, making it a compelling option for any DeFi investor.

A closer look at xARB’s risk score

The xARB index has been assigned a ‘low’ risk level score of 70/100. This assessment takes into account factors such as simplicity, safety, and longevity.  Furthermore, all of the index’s underlying protocols have been audited by reputable firms, including HashEX, Paladin, Certora, Ackee, Dedaub, and Sherlock (among several others).

Lastly, as things stand, the index’s underlying protocols GMX, Gains Network, and Trader Joe’s have total locked values (TVLs) of $455 million, $20 million, and $124.5 million, respectively.

What are the strategies underlying the Arbitrum Yield Index?

GMX (33.04%) https://gmx.io/

As a leader in decentralized perpetual futures trading, GMX has attracted significant liquidity and trading volumes over the past year. By converting capital into GMX and staking it, xARB taps into consistent revenue from trading fees. Staked tokens earn investors a portion of these fees, providing a steady source of income for them.

GNS (22.10%) https://gainsnetwork.io/

Gains Network (GNS) offers leveraged trading across a variety of assets ranging from cryptocurrencies to tokenized stocks. By staking GNS, investors can earn rewards from trading fees on the platform that are compounded automatically.

JOE (29.86%) https://traderjoexyz.com/

Trader Joe offers innovative liquidity solutions using its unique liquidity book model. Staking JOE tokens enables the vault to capture liquidity provision rewards in USDC, which are then compounded for additional returns.

Other aspects of the Arbitrum Yield Index (xARB) to consider

• Routine optimizations: The index is actively managed, with underlying strategies rebalanced regularly to adapt to market conditions and maximize yields. Rebalancing ensures asset allocations align with desired risk and return profiles.
• No lock-up period: Investors can withdraw their funds at any time — unlike several major DeFi platforms like Synthetix and Balancer — thus providing unparalleled operational flexibility.
• Minimal withdrawal fees: xARB’s liquidity buffer helps minimize gas fees, making withdrawals cost-effective, especially for frequent traders.
• Fee considerations: xARB charges a 10% reward fee and a 1.5% streaming fee, which can impact overall returns.
• Exposure to market volatility: While the index diversifies across protocols, underlying assets remain subject to market fluctuations.
• Investor due diligence required: As with any investment — especially cryptocurrencies — investors need to perform their own research to understand understand associated risks.

How to Get Started with the Arbitrum Yield Index Vault

• Connect: Use any Ethereum compatible wallet like MetaMask to connect to the Arbitrum network through Rivo
• Deposit: Follow the instructions provided on the interface and invest. Once complete, your funds will be pooled into the vault and allocated accordingly.
• Monitor and manage: Track your investment performance through the dashboard and withdraw your funds at any time

Conclusion

Arbitrum Yield Index Vault (xARB) offers an attractive entry point for retail investors looking to explore the DeFi market. It allows them to capture consistent yields while minimizing the complexities of managing multiple DeFi positions. Additionally, with its regularly optimized strategies, active yield generation capabilities, and high liquidity provision, xARB offers a balanced risk-reward DeFi exploration tool.