Yield farming, as the name suggests itself, the farming which produces a yield, or a profit, but how? It is a process which is known to practice high returns and rewards over the lending of crypto assets as a lender. This farming is known to affect the entire DeFi process, by driving the profit share from million to billion, although it can be risky and full of market liquidity involved.
This method fully incorporates the liquidity providers and helps them to stake their crypto assets under the system of smart-contract. After staking the crypto assets, you will become eligible to earn higher rewards in form of governance tokens, interest rate, etc. the staking of crypto tokens helps to bring liquidity in the DEX (Decentralized exchanges),
Higher rate of liquidity means the fastest way of selling or buying of crypto assets.
What is meant by Yield Farming?
The crypto liquidity providers (LP) are known as the main driver of any DeFi system, which have been given a new name of ‘yield farmer’. The yield farming has been a new way of injecting the liquidity for more investment flow through the cryptocurrency platforms, It is a two in one scheme, where you will target two areas of functioning under DeFi applications, first to bring liquidity by adding more values (in form of assets, and tokens) in a decentralized system. If you are interested in bitcoin trading visit Weed Millionaire
And second, earning more cryptocurrency by investing your current cryptocurrency, like you get yield on your crypto asset whenever a new user purchases it, in return they are provided with the governance tokens, which usually are more costly and add profit into your account.
When did Yield farming was launched?
Yield farming became popular at the starting of June 2015, when the COMP token was started, COMP means the Compound governance token, which enables a person to vote and suggest modification in the protocol of decentralized farming.
Yield farming is a way of utilizing the extra cryptocurrencies that are left due to the surplus generation or as a form of waste money.
Yield farming provides an innovative approach to use these so-called idle cryptocurrencies by turning them into liquidity providing tools through which the investors can earn rewards.
How do I start DeFi yield farming?
· Buy any crypto currency that is linked through a smart contract chain by visiting their website.
· Then search for fiat currency matching your country’s native currency.
· After searching the right currency, you can set its market order and limit its price.
· Then create a hot wallet to store your cryptocurrencies.
· Now Connect that hot wallet to your cryptocurrency’s smart chain network.
· Transfer your crypto currency to your wallet, choose your withdrawal network and add cake token address to your hot wallet, swap your currency with that token and then stake or yield farm your token by following the procedures given on that website.
Yield farming eliminates all the intervention of third parties by formulating an automated market value generator, this market value is generated through percentages of liquidity injected through liquidity providers.
The liquidity is created on the basis of an applied algorithm which sets value depending upon the percentage of borrowers who want to borrow the cryptocurrencies by finding them the suitable lenders through the liquidity pool.
In exchange of lending loans to the borrowers, the liquidity providers are rewarded in form of Comp tokens, and the returns on the crypto asset is calculated by annual percentage yield (APY) and annual percentage rate (APR)