How PrivacySwap’s Yield Optimizer Lets You Earn While You Sleep

4 min readMay 28, 2021

In its constant efforts to innovate for the benefit of its users, PrivacySwap Finance continuously keeps up with the Decentralized Finance yield farming ecosystem. Hence, creating a yield optimizer to provide a better and secure service makes sense as the next feature in their innovation roadmap. How does it work?

Yield Optimization is a system that uses an Auto Compounding process to optimize yield. The assets will automatically be staked into a ‘vault’ and will be safeguarded by smart contracts.

How does our PrivacyVaults work?

The ‘Vaults,’ in which you stake your crypto tokens, are PrivacySwap’s principal offering. By compounding various yield farm reward tokens back into your first invested asset, the investment strategy related to the individual vault will automatically raise your invested token amount. Despite what the term ‘Vault’ implies, your assets are never locked in a vault on PrivacySwap: Thus, funds can be withdrawn at any time.

The first step in allowing the platform to help you increase your assets is to deposit the quantity of LP (liquidity provider) tokens you want to stake into the vaults.

After that, PrivacyVaults will take care of the rest. Smart contracts will focus on balancing your rewards and optimizing compounds every day. By stating this, smart contracts will harvest the awaiting rewards at certain intervals, resulting in a greater APY for users.

In addition to that, the platform will utilize auto compounding, which includes gas accumulation. For every compound or harvest executed by the harvester, a percentage of profit will be rewarded as incentive. Yields will be based on the following instances;

  • All vaults will be harvested and their respective rewards compounded back into the LP. This is done via a smart contract which automatically splits the rewards, obtains the countertoken and makes the LP before compounding that LP. PrivacyVault will also take a total of 10% of profits as a performance fee.
  • Every time a caller calls for the ‘harvest’ function, 0.5% of profit will be given as incentive for paying the gas to harvest and compound that farm.
  • 0.5% of profits will also be given after the strategist who wrote the strategy for that particular vault
  • The PrivacySwap treasury will also receive 3% of profits to perform buybacks of PRV and burning for deflationary purposes..
  • Developers, on the other hand, receive 1% of profits to further fund development as well as upkeep of PrivacySwap’s ecosystem.
  • 5% of profits are taken and distributed to PRV vault stakers. This is to reward our PRV holders.

As of the moment, Strategists, Treasury, Developers, and Callers are all under PrivacySwap. Nevertheless, security and safety are always PrivacySwap’s utmost priority. And in future, when vaults are stable and our governance is up and running, PRV holders will be able to vote to create new strategies, or even reallocate the performance fee and its allocations.

What is APY?

The classic definition of an annual percentage yield (APY) is the actual rate of return on an investment after factoring in the effect of compounding profits. Using this language, the yield farm would be compounding your revenue for you. APR (annual percentage rate) is a more appropriate phrase to use, as it refers to the yearly rate earned on an investment. By definition, your 100% yield farm would double your initial investment by the end of the first year without reinvesting any returns. APY is simply APR, compounded.

A typical investment does not pay off annually but rather in smaller increments (i.e., daily, monthly, etc.) and in the case of yield farms, every single block Returns are given out on a per-block basis in yield farming. With an average of 28,800 blocks per day and low transaction costs, you may expect a substantial amount of compounding or exponential increase in your return. Let’s have a look at how to achieve that.

Compound = P * (1+r/n)^nt Example : 100 * (1+1/12)^(12*1)

P = principal or starting balance

r = APR = 100%

n = compounding periods = 12 months

t = time = 1 year

The simple APY calculation in excel can also be stated as =EFFECT(r, n)

Why is Yield Optimizer better than PrivacySwap’s traditional farming?

  • To maximize your returns, you will no longer need to manually restake your returns or Liquidity tokens in the vaults and pay the necessary gas fees. Everything is done automatically for you.
  • Farms do not automatically compound, and the user must manually harvest them to compound them. However, PrivacySwap’s Yield Optimizer incentivizes users to execute the Harvest function by apportioning part of the rewards to the Harvester. The remaining Harvested amount is then automatically compounded by the smart contract.

Furthermore, users holding native PRV tokens by staking them in the native PRV Single Asset Vault will be rewarded with a portion of the other Vaults’ rewards as well — in an effort to incentivize and reward holders of PrivacySwap’s native PRV tokens.

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