Baguette introduces the Auto-Compounding feature!
BAG holders and Baguette users, today marks the launch of auto-compounding! And to implement this cool feature, we decided to work hand in hand with the best auto-compound yield farming service on Avalanche: Yield Yak.
Auto-compounding means that rather than having to manually re-stake (or add them automatically to your BGL liquidity in the farming case) your BAG interests every so often in order to get the best APY, it will be done automatically for you!
How does the auto-compounding function work on Baguette?
It’s so easy! When you go and deposit your BGL tokens on a farming pool in the Mill or deposit your tokens in the Oven to stake them, you just have to enable the auto-compound option with the ‘On/Off’ button.
Then all you have to do is to click ‘Approve’ then ‘Deposit’ as usual.
Note : if your tokens are already deposited in farming or staking pools on Baguette, you will need to remove them first and then redeposit them while enabling the auto-compounding feature.
How does it work behind the scene and how much does it cost ?
If you are not familiar with the way Yield Yak works, here is a primer for you. If you want to dig further, feel free to browse resources directly on the Yield Yak website (links below).
Yield Yak centralize all the staked tokens in their own contract, which in turn deposits the amount of tokens that all users commited to the pool on the underlying Baguette pool. Each pool shows a ‘Reinvest’ button that anyone can click in order to trigger the reinvest mechanism. Clicking the button costs the price of a transaction, but the caller gets a percentage of the reinvested rewards (4% in the example below) as an incentive to cover for the transaction cost and effort.
When the reinvest button is clicked, the rewards (minus the fees) are swapped for the staking token and added to the deposited tokens on the Baguette pool, which increases the stake of all participants of the pool at once.
To summarize, using auto-compounding with Baguette — and therefore Yield Yak — does not cost anything to the users. The fees are cut at the moment of the reinvest mechanism, meaning that a small part of everyone’s rewards is not reinvested in the pool, but the compounding effect widely covers for this small loss. You could compound manually and get better yield, but who wants to do that when it can be done automatically ?
We are very pleased to have this partnership with Yield Yak and we hope you enjoy this new feature. Make the DeFi crunchy again!
Please welcome Yield Yak to the Baguette Family!
Learn more about them: