What is Yield Farming and how to earn on it?

In recent months, the crypto community has been actively talking about Yield farming. We decided to tell you what is it and how to significantly increase profit from the DeFi projects using farming. Initially, the concept of Yield Farming was a joke, but it has taken root in the crypto space and is now taken seriously. So what is it?

What is Yield Farming?

In simple terms, Yield farming is a new type of mining that has appeared in the DeFi segment. For the fact that users provide liquidity in DeFi projects, they receive a reward in the form of project tokens. Yield Farming triggered the growing popularity of the DeFi segment, and it all started with Compound.

In June 2020, the Compound project team came up with a way to reward the user for taking loans and deposits. So, if a user took a loan, then the next day he received COMP tokens. A similar situation with deposits - for the contribution of assets at interest (APY), users earned COMP tokens. This new model has taken root so strongly that no DeFi project is now unthinkable without Yield Farming.

However, farming is not just mining, it is an opportunity to gain control over projects. So, each received token allows you to vote for the development of this project, and the more such tokens you have, the stronger your vote. It means that farming allows you to implement the concept of Decentralized Project Management (or DAO).

How to earn profit with Farming?

First of all, for this, you must have certain cryptocurrencies in your accounts, since not all tokens and coins can be used for farming. Basically, these are ERC-20 tokens, most popular among them include:


- Basic Attention Token (BAT)
- 0x (ZRX)
- WrappedBTC (WBTC)
- Dai (DAI)
- Tether (USDT)
- USD Coin (USDC)
- Ethereum (ETH)

These are the main coins that you can invest and earn on Yield farming. However, for each of them, the rates of return are different. It depends on the popularity of the coin and the number of blocked assets. The more participants and the volume of blocked funds, the lower the profitability from farming and vice versa.

These are the main coins that you can invest and earn on Yield farming. However, for each of them, the rates of return are different. It depends on the popularity of the coin and the number of blocked assets. The more participants and the volume of blocked funds, the lower the profitability from farming and vice versa.

DeFi Token Growth

However, the best option at the moment is holding the coin. This is due to the fact that DeFi coins are now very popular. Due to this, the demand for them increases significantly, and as a result, the price of the coin increases in tens times.

Take Compound as an example. Initially, the price of the coin was set at around $16. However, the demand was so strong that after a few days the price of the token rose to $480. The growth was 3000%! It allowed the project to get ahead of the oldest and most famous DeFi project - Maker.

Or take the YFI token from the yearn.finance project, the price of which was initially $0. A month later, the cost of this token not only surpassed the cost of Bitcoin, but also reached a fantastic mark of $40,000!

And we see similar situations almost every day. Dozens of tokens from various DeFi projects skyrocket by thousands of percent in a few days. SushiSwap and Kimchi are further proof of this. Therefore, farming is currently the most profitable activity in the cryptocurrency industry.

Conclusion

Yield Farming is a new trend in the crypto industry that has become incredibly popular. It is thanks to this invention DeFi has gained such high popularity today. It is a new trend that will be used by many new projects and, no doubt, we will see many more new projects that make themselves known on the market.

P.S. We can help you with this. Our platform allows you to build absolutely any DeFi project in the crypto space in 1 day. You just need an idea, and we will take care of the rest!

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