I always thought that one of the biggest opportunities provided by the rise of DeFi is yield farming.
So, what’s yield farming? That is the process of using decentralized finance (DeFi) to maximize returns. Users lend or borrow crypto on a DeFi platform and earn cryptocurrency in return for their services.
Yield farmers who want to increase their yield output can employ more complex tactics. For example, yield farmers can constantly shift their cryptos between multiple loan platforms to optimize their gains.
* Essential information, in brief, you need to know:
Yield farming is the process of token holders maximizing rewards across various DeFi platforms.
Yield farmers provide liquidity to various token pairs and earn rewards in cryptocurrencies.
Top yield farming protocols include 4dot – Cross Chain Farming, Uniswap and many others.
It took me a while to figure out some things when I started working with cryptocurrencies, a lot of it was a big enigma to me and I didn’t have anyone around to refer me to and explain to me, I relied mostly on subreddits, so maybe someone of you will consider this to be helpful because at first, it was not clear to me either.
17 thoughts on “What is “Yield farming”?”
The diagram doesn’t really depict yield farming though, right? Just a lending/borrowing protocol?
Nicely put, thanks for the effort! 😊
Yield farming is also associated with decentralized exchanges (Curve, Uniswap, Sushi, etc), moreso even than lending markets like you show above.
In that context your green circle is people providing liquidity to pools in the DEX, the purple circle is the DEX, and the red circle are people doing swaps on the DEX.
The DEX needs liquidity depth so the swappers have something to swap, so they incentivize the liquidity providers with their token (CRV, for example). Swappers pay a fee to the DEX when they trade.
The “farming” generally refers to LPs selling the token they get to buy more of whatever they are LPing, to compounding their position.
How much money can someone make yield farming, can they start today and replace their income in some time frame shorter than what they would do buying dividend stocks or rental property, two popular forms of “passive income”?
This isn’t yield farming though…
That’s useful as a good overview, thanks! Could you explain the risks that the lender exposes himself to using these platforms besides the obvious platform scam/shutdown?
Thank you for this one! Really did a great job. How about staking? People should learn more about how great staking is. The hardware requirements to stake are much less as is the need to constantly have powerful mining-related equipment turned on 24/7.
By some estimates, a proof-of-stake network uses 90% less total energy than a proof-of-work network.
That is why Ekta is engaged in staking because it is much safer. Their have holding periods up to 12 months and their APR is up to 150% as well. Better check them out!
Thank you very much. I finally understood what is it all about!
Can you explain how the yield rewards compare to the interest charged to the borrower?
Also, can you explain the benefit of borrowing in defi, if you have to put up at least as much or maybe twice as much in real money as collateral.
How do I liquidate someone who is overleveraged?
Check out [mav.xyz](https://mav.xyz), they’re pioneering the ALP model over the more typical AMM protocols to allow LPs to stake more, less slippage, etc
That is not how a Yield Farming goes sir!
Come across this **METRIA NETWORK** project and see how a Yield Farming mechanism goes. But, the project does not only offer Yield Farming as it has three unique way of earning passive income. The one being the topic of this thread and the other two is the Staking and Liquidity Mining!!
So, if you have time you can also check this project!
Great effort, man. I’m already sharing this content with my friends. Can you also give some thoughts about the platforms that you are using? I’m on BSC (Cake, Kalmar and Venus) and I keep tracking DeFiLlama for new protocols.
TL;DR it’s when the rich get richer
I was confused as well about how DeFi works and yield farming but thankfully, I got to see this video by RAMP DeFi. RAMP is amulti-chain lending platform that maximizes capital efficiency on your assets. With RAMP, users can:
1. Deposit collateral assets for high yield
2. Borrow rUSD stablecoin against asset deposits
3. I was also confused about how DeFi works and yield farming, but thankfully, I got to see this video by RAMP DeFi. RAMP is a multi-chain lending platform that maximizes capital efficiency on your assets. With RAMP, users can:
Thanks for the effort.
Another aspect that people need to look more into is diversification in yield farms.
Spool makes this easier with less risk and fees