How Does Harvest Finance Work?

Automated yield farming aggregator optimizing returns across DeFi protocols

Harvest automatically reallocates deposited funds to chase the highest returns across multiple protocols. Users deposit into vaults and receive fTokens representing their share.

Auto-compounding vaults with profit-sharing to FARM stakers

Vaults harvest yield from strategies, auto-compound returns, and distribute a portion of profits to FARM token stakers. 30% of vault profits go to FARM buybacks.

FARM governance token with profit-sharing and emission schedule

FARM token receives 30% of all vault profits via buyback mechanism. Token also provides governance rights over protocol parameters and strategy selection.

Multi-protocol yield strategies across Curve, Aave, Compound, Sushiswap, and others

Strategies deploy capital across numerous DeFi protocols. Each integration inherits the smart contract risk and economic risk of the underlying protocol.

AMM-derived price feeds for vault share calculations

Vault share pricing depends on AMM pool prices, which are vulnerable to flash loan manipulation. This was the exact attack vector in the October 2020 exploit.

Strategies interacting with manipulable AMM price sources

The 2020 exploit demonstrated that strategies relying on AMM spot prices for valuation are inherently vulnerable to flash loan manipulation, an insight that has informed the broader DeFi security landscape.

Flash loans can manipulate AMM pool prices within a single transaction, allowing attackers to deposit at artificially low prices and withdraw at inflated prices. This exact attack vector caused the $24M exploit in October 2020.

Strategies deploy into external protocols. If an integrated protocol is exploited, Harvest vaults auto-compounding into that strategy amplify losses before the strategy can be paused or redirected.

30% of vault profits directed to FARM buybacks reduces effective yield for depositors. During low-yield periods, this extraction may push net APY below competitive alternatives, triggering withdrawals.

Rebalancing between strategies requires interacting with multiple external protocols. Failed migrations or slippage during large rebalances can result in fund loss or suboptimal allocation.

Harvest frequency depends on gas costs and yield size. During high gas periods, small vaults may not be harvested frequently enough, reducing effective yields or making strategies unprofitable.