ARP1 is the codename of my latest live portfolio. ARP1 stands for "Airdrop Reference Pool 1."

The goal of ARP1 is to solve the classic dilemma of "you can’t have your cake and eat it too." Here, “cake” refers to staking rewards, and “eating it” refers to liquidity mining rewards.

To sum it up: ARP1 allows me to earn 100% of staking rewards (including airdrops) while also gaining 80% of liquidity mining rewards. The 100% and 80% figures refer to the total capital in the portfolio. For example, if I invest 1000 USDT in ARP1, I will receive 1000 USDT in staking rewards, and on top of that, 800 USDT in liquidity mining rewards.

How does ARP1 achieve 180% capital efficiency? I’ll explain that in detail later. First, let me introduce why ARP1 exists.

1. Why was ARP1 created?

Since the launch of Airdrop Reference in early March 2024, more than six months have passed. To help everyone participate in different projects and enjoy DeFi’s benefits, I’ve been trying to teach step-by-step using live portfolios.

So far, I’ve launched two live portfolios:

1. Bitcoin accumulation portfolio on June 5, 2024 (see: [Portfolio] This is how you should hoard BTC—Don’t miss the DeFi opportunities).

2. Staking yield maximization portfolio on July 17, 2024 (see: [Portfolio] How to Maximize Staking Rewards?).

However, people still find them too complex, especially the Bitcoin portfolio, which requires tricky maintenance. This made me think: Is there a way for people to easily track my operations and conveniently participate, like copy-trading on exchanges, with just a one-click setup?

After researching and experimenting, I decided to launch ARP1 on Enzyme, a platform that allows copy-trading strategies similar to what exchanges offer. Details will follow.

In short, if you like ARP1’s strategy, you can easily enjoy the same returns on Enzyme without any manual portfolio management. It’s somewhat like a traditional fund, but the key difference is that you maintain full control over your crypto. You can withdraw anytime without anyone’s approval.

Before diving into ARP1’s yield mechanics, let’s first talk about Enzyme, because without it, ARP1 wouldn’t exist.

2. What is Enzyme?

Enzyme is a decentralized asset management platform, basically an "automated financial manager" on the blockchain. With Enzyme, I can combine various DeFi protocols like building blocks, creating my own investment strategies, and then letting the system execute them for me.

Think of it as a smart assistant. But not just smart—it’s obedient and secure. In short, Enzyme has three major highlights: transparent fund operations, easy copy-trading, and high security.

• Transparency: Enzyme is decentralized, meaning all fund operations are open and visible to everyone on the blockchain. You can track every move I make in ARP1 under the "Activity" tab.

• Effortless Copy-Trading: If you like a particular strategy, like ARP1, you can "copy" it with a single click, without constantly monitoring and adjusting your portfolio—just like autopilot! Plus, unlike traditional funds, Enzyme gives you maximum flexibility: your funds are withdrawable anytime, with no lock-up periods. The “Deposit” and “Redeem” buttons are all you need.

• Security: As a decentralized platform, Enzyme’s smart contracts are rigorously audited. You don’t have to worry about the platform running off with your funds; everything is executed on-chain via code, not controlled by any individual. It’s like a self-operating finance robot you can trust.

Enzyme’s security is reflected in its history and Total Value Locked (TVL). It’s been running safely since March 2021, and now over $140 million in crypto assets are locked in Enzyme. This reliability is a key reason I chose Enzyme for ARP1.

Thanks to Enzyme, ARP1’s strategy is no longer a complex math puzzle—it’s a “foolproof” copy-trading process. Just click a button, follow my strategy, and enjoy the dual rewards of staking and liquidity mining.

3. What can ARP1 offer you?

ARP1 offers you three main benefits, two of which we’ve already covered:

1. Staking rewards, including airdrops.

2. Liquidity mining rewards.

The third benefit is Airdrop Reference Project Points, which could potentially be more valuable than the ARP1 returns. I’ll explain this in detail later.

As mentioned earlier, ARP1 can provide 100% staking and airdrop rewards while also allowing 80% of your capital to participate in liquidity mining—this clearly involves leverage. Before explaining the returns ARP1 can generate for you, it’s important to first introduce the low-risk leverage that I use.

3.1 Low-Risk Leverage

ARP1 uses leverage by depositing weETH and borrowing wETH. Since both of these are backed by ETH, the prices of wETH (wrapped ETH) and ETH are the same, and weETH (wrapped eETH) is a token whose price gradually increases as eETH (staked ETH) accumulates rewards.

However, weETH carries the risk of depegging from ETH. For example, in the past, stETH (staked ETH) has experienced a price depeg, with the most extreme deviation being around 6%. For this reason, I only borrow 80% of the total capital, leaving a 20% buffer, which far exceeds stETH’s historical depeg level, thus greatly reducing the risk of leverage.

Now that we’ve explained the low-risk leverage, you should understand that weETH is the source of the staking rewards. But how much are these rewards? Let’s break it down in detail.

3.2 ARP1’s Yield Sources

3.2.1 Staking Rewards

Currently, Etherfi has officially announced that the APR (Annual Percentage Rate) for eETH is 4.22%. This APR doesn’t include additional rewards from re-staking.

By depositing weETH into AAVE (which offers 0.06% deposit interest) and borrowing 80% wETH (with an approximate borrowing interest of 2.57%), the formula for calculating weETH returns is:

Staking APR + AAVE Deposit Interest + Re-Staking Rewards + Additional Airdrop Bonuses − Borrowing Interest

= 4.22 % + 0.06 % + ？ + ！ − 80 % × 2.57 %

= 4.28 % + ？ + ！ − 2.056 % =4.28%+？+！−2.056%

= 2.224 % + ？ + ！

In this formula, ? and ! represent the unknown re-staking rewards and additional airdrop bonuses.

Let’s illustrate this with an example. If you hold 10 ETH and convert it into weETH, borrowing 8 ETH in the process, your annual return would be:

0.2224 ETH + Re-Staking Rewards + Airdrop Bonuses

This means that not only is the leverage low-risk, but it also generates substantial returns—this is one of the benefits of liquidity staking. Many people understand this logic, which is why deposits of weETH on AAVE are often full, and it’s hard to find a spot to deposit.

3.2.2 Liquidity Mining Rewards

Half of the borrowed wETH is exchanged for WBTC, and these two assets are paired on Uniswap v3 to provide liquidity and earn trading fees, as shown in the figure below.

It’s worth mentioning that using WBTC is a temporary choice, and I plan to replace it with decentralized BTC once it becomes available.

You might be wondering why there are two liquidity pools. This setup is based on extensive backtesting, and unless special circumstances arise, these two pools will follow a passive rebalancing strategy. I won’t actively trade to balance the WBTC and wETH. When excess WBTC or wETH accumulates, they’ll be converted into single-sided limit orders. This way, I can rebalance the pool while still earning trading fees.Let me show you an example of the liquidity mining details from the position with an 18.97% share.

In this position, almost all the assets are wETH, with just a small amount of WBTC. This excess wETH wasn’t converted into WBTC for rebalancing; instead, it was used as a single asset to provide liquidity. This approach allows me to rebalance while still earning trading fees.

Now, let’s look at the 60.79% share pool, which is the main source of trading fee income, as shown in the figure below.

As you can see from the arrow in the figure, the trading fees for this position are 5.65 USDT, significantly higher than the 0.02 USDT in the previous position. According to backtesting, this liquidity mining strategy generates an APR of around 22%, after accounting for impermanent loss. However, I can’t reveal more details, as I’d get in trouble with my friends!

After explaining both the staking and liquidity mining rewards, let’s move on to the third benefit you could receive: Airdrop Reference Points. Strictly speaking, these aren’t a return but represent your contribution to the Airdrop Reference Project.

3.2.3 Why Participating in ARP1 Earns Airdrop Reference Points

When you participate in this project and earn profits, 20% of the performance fees will be allocated to the Airdrop Reference Project, as shown in the image below.

The address in the highlighted box is:

0xeda994731f5e8c9294e18848c34ea347c2263218

This is the Airdrop Reference Project’s EVM wallet. Before the Airdrop Reference DAO (Decentralized Autonomous Organization) is established, this wallet is managed on behalf of the project. Once the DAO is formed, the wallet will be transferred to a multi-signature wallet controlled by the DAO.

To help kickstart the Airdrop Reference Project, I’ve already donated 1000 ARP1 shares, equivalent to 1000 USDT, to this address, and I plan to continue donating. You can verify the donation record here, as shown in the figure below.

Now, let’s talk about how Airdrop Reference Points are calculated. It’s simple: for every ARP1 share, you earn 3 points per day. There will be automated systems in place to track and display this in the future. The project roadmap will be clarified in the forthcoming Airdrop Reference Whitepaper.

After covering what ARP1 can offer, now it’s time to explain how to participate in this project. In fact, if you’re not a DeFi newbie and have read through the content above, you might be able to set up something similar by yourself. However, if you prefer not to reinvent the wheel and want to contribute to the Airdrop Reference Project while also growing with it, I welcome you to join ARP1. Keep reading for the steps.

4. How to Participate in ARP1?

Participating in ARP1 is just like joining other DeFi projects. You need the following:

• Cryptocurrency (ETH, USDT)

• Chrome browser

• Wallet (MetaMask or Rabby)

I recommend using Rabby. If you haven’t installed it yet, you can follow this detailed guide.

If you’re completely new and have never dealt with cryptocurrency, you’ll need to carefully review the beginner’s guide to learn how to purchase cryptocurrency.

Once you have the above prerequisites, the process becomes very simple. Click the link to enter the page shown below:

1. Click Connect Wallet to link your wallet and sign in.

2. Then, click the Deposit button as shown below:

A pop-up window will appear. Follow the steps indicated by the arrows in the image:

1. Enter the amount of USDT you want to deposit.

2. Agree to the terms and approve the transaction.

3. Confirm the signature through your wallet.

4. Finally, click the Deposit button to complete the deposit.

A small reminder: the ARP1 shares you receive after depositing cannot be immediately transferred or redeemed. You need to wait one day before you can do so.

Conclusion

By now, you might have realized that behind ARP1 lies a grander plan: the Airdrop Reference Project. I aim to use ARP1 as a bridge to find more like-minded individuals to help grow this project together. If you're interested, I invite you to join our Discord, where we’ll be discussing the Airdrop Reference Whitepaper and the project’s future. Let’s explore this new frontier together!

---

About Airdrop Reference

Airdrop Reference is an innovative blockchain education and promotion platform aimed at spreading basic blockchain knowledge and helping ordinary users understand and participate in the development of blockchain technology. The mission of this project is to lower the entry barriers to blockchain, promote high-quality blockchain projects, and allow more people to enjoy the benefits of the Web3.0 era.

Discord | 𝕏 | Zhihu Column | Mirror | WeChat Official Account | Daii’s 𝕏