How to get free lunch with liquidity mining and hyper-compounding

Hello all, thought it would be useful to share a strategy[1] how to increase your crypto portfolio by taking advantage of the liquidity mining[2] program currently running on Polygon[3] and AAVE[4].

So what does Polygon and AAVE offer?

Polygon and AAVE recently launched a program (right after AAVE launched on Polygon’s) to offer MATIC token rewards to whoever deposited or borrowed funds from AAVE. The program details can be found [here](

What strategy is good?

There a few strategies you can do depending on what tokens you hold. The idea here is to maximize rewards by taking account the APRs for deposits and borrowing. All current markets are profitable and currently offer MATIC tokens with APRs ranging from 2 up to almost 20%.

Strategy 1: One that is particularly interesting is the MATIC market. You can deposit your MATIC and earn Matic rewards plus the deposit APR. You can then borrow MATIC and deposit again to gain even more rewards (hyper compounding). This strategy basically works well because you are not really affected by price fluctuations since everything is based on MATIC. This is basically a loop where you can basically borrow as much as possible and deposit again. Since the borrowing APR is lower than the rewards it is basically free lunch. Plus your health factor will remain stable since all is based on only one coin 🙂

Strategy 2: You can move deposits/borrowing around depending on how the variable APR moves. For instance I decide to cash my MATIC to USDC since I had enough gains. Then I deposited my USDC to start gaining the MATIC rewards plus the APR for deposit. I then borrowed some USDC (keep an eye here on the health factor, you don’t want that very close to 1) and converted to USDT using quickswap. Then deposited the USDT (hyper-compounding) because the deposit rate was crazy high (50%) plus the MATIC rewards is about 20%. Price fluctuations don’t matter either since both USDC and USDT are stablecoins. Again this is free lunch 🙂

Hope this is useful to some. Glad to answer any questions.

Ps. I don’t consider myself as knowledgeable as others so there may be some risks I didn’t consider here.

[1] Please note that this is not recommended for novice crypto folks not until you get somewhat familiar with dapps, side chains/L2s and related rewards/risks.

[2] For those not familiar, liquidity mining is when you lock a certain amount of a coin (usually the big ones and stablecoins) in a smart contract and earn rewards (a certain % of your liquidity in whatever coin the devs offer) for the time period you provide liquidity and the rewards programs runs.

[3] First thing is to transfer funds to Polygon. You can do that using their [wallet]( Gas fees are cheap the past few days and likely to remain cheap due to volume moving to L2 or side chains. So it’s good time in case you want to start experimenting with these strategies. Please note that Polygon is a side chain and not L2, I.e. not as secure as ethereum mainnet. Do your research and do not risk all your funds

[4] take a look at AAVE’s FAQ and understand how the whole thing works, what health factor is and what risks are there. Give it a try when confident.

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