DeFi Yield Farming Explained – Crypto Boys

Yield farming (or liquidity mining) is a brand new technology made possible by DeFi. It can help motivate the liquidity needed for projects or start a fair allocation of a new token and build an active and sustainable community. Yield farming rewards reward those who provide liquidity or otherwise help develop a decentralized protocol.

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Main Goals of Yield Farming

Yield farming is typically done with two main goals in mind:

  • Incentivizing users to deposit and secure their funds through a DeFi application, increasing the Total Value Locked (TVL) and booting the demand part of the system. The more liquidity available, the less likely users are to slip up, and it encourages the expansion of the demand aspect of the ecosystem by providing superior service to other competitors.
  • Equally, give DeFi an application’s governance certificate to protocol users who accept the risk of depositing elsewhere (eg temporary loss). The fair distribution of tokens allows for a decentralized governance system from day one as no part of the offering is reserved for exclusive organizations.

Agriculture has proven to be a successful method of launching a DeFi ecosystem by fostering a network effect by providing liquidity from the supply side to projects and creating a community of stakeholders primarily made up of people using the protocol. Yield farming incentive programs are available in a variety of forms, depending on the specific goals of each project. However, they usually require the use of existing infrastructure to create different reward systems that most effectively achieve the intended goal. DApp developers have considerable creative flexibility in terms of the different protocols they choose to incorporate into their liquidity mining to create a thriving ecosystem and an incredibly aligned community of stakeholders.

User Benefits

Yield farming is a reward for users who provide liquidity or other value-added services to the open-source application’s network. Yield farmers are compensated pro rata in the application’s indigenous governance token. This gives the user a better annual percentage return (APY) on their allocated liquidity. Yield farming rewards are added to any inherent revenue streams built into the platform e.g. B. Trading fees on a decentralized exchange and/or interest earned by lending money on the market. Certain projects also provide yield farming benefits to other functions, such as participants on the platform or to support community marketing, developers, or initiatives.

Agriculture on position exchange

Yield farms allow users to earn POSI while supporting position exchanges by staking LP tokens.

Read the farm usage guide to learn how to start farming.

Note that yield farming can produce better returns than traditional pools, but this is also possible impermanent loss. It’s not as scary as it sounds, but it’s important to understand the concept before getting there.

The benefits of yield farming cryptocurrencies
As money is added to the liquidity pool, interest rates could rise when demand is very high. For this reason, it is advisable to use Yield Agriculture DAI or ETH as both are very popular in the present.

An overview of the top 10 yield-oriented crypto platforms in the market today is available below: OKX – Overall Best Yield Farming Crypto Platform. Battle for infinity – Great alternative to yield farming through decentralized staking. eToro – Earn passive income through Ethereum, Cardano and Tron.

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