What does yield farming mean?
Yield farming is a way of turning crypto into more crypto. It often involves staking crypto in a liquidity pool over a certain period of time in exchange for transaction fees or some other reward. A yield farmer will strategically stake in multiple liquidity pools to maximize their return.
What Is Yield Farming?
Yield farming is also known as liquidity mining, because yield farmers are attempting to extract value out of liquidity pools.
Liquidity pools are comprised of tokens that are held in smart contract. Liquidity pools are necessary because decentralized exchanges (DEXs) operate at too fast a pace for traditional market makers to facilitate them; without them, the rate of slippage would become unacceptably high.
Liquidity providers lend tokens to a liquidity pool so the automated market maker can facilitate trading and other DeFi activities. In consideration of lending their tokens to be held in smart contract, a liquidity provider is paid a share of the fees that are generated when other investors use their liquidity pool (in proportion to their contribution to it). Liquidity providers may also receive novel tokens, which are often hard to purchase elsewhere.
A liquidity provider becomes a yield farmer when they begin strategically selecting which liquidity pools they will lend to. Their aim is to maximize their payout by locking up their tokens in the highest yielding pools they can access.
This involves exploiting multiple pools simultaneously, a series of pools, or both. But yield farming can only become immensely profitable because it carries certain risks!
Why Is Yield Farming Risky?
A yield farmer’s goal is to maximize their annual percentage yield (APY), which measures their ROI while taking compounding interest into account. It is a comprehensive way of tracking ROI while investing in multiple different liquidity pools.
But maximizing an APY is not easy. The yield farmer’s ideal strategy includes investing in liquidity pools that share very few liquidity providers, as these provide the highest ROI. As more liquidity providers enter a pool, the lower its returns become.
Recognizing the right time to exit a pool with an increasing number of providers is key to successful yield farming. This is why successful yield farming strategies are so fiercely guarded – they become less effective as more people use them.
Furthermore, smart contracts and the other building blocks that comprise a DeFi system are not 100% reliable. If any element that your liquidity pool is reliant on bugs out, your only recourse for losing your funds may be punching your computer screen.
Conclusion
Yield farming can be a great crypto investment strategy – but not if you go into it blindly. It takes a serious knowledge of DEXs to formulate a sound plan, and your chance of success becomes greater when you are a whale. But there are stories of savvy newcomers who turned a few tokens into a fortune through yield farming!
Yield Farming: What Is Yield Farming and How Does It Work? originally appeared at Libertas Bella.
so, Who gives a shiit. A derivative of a fantasy money. That is what history will finally say.
Crypto is sucker farming
“Yield farming is also known as Liquidity Mining”?
Hmmm…Maybe a degree, in MMRB. Could help explain the concept. Entire towns, and thousands of people were helped in finding new direction in life…Thanks to MMRB enlightenment.
mormon mittens romney, and BANE (or is Bain?) capital.
People helping people, Doesn’t get any better than that!
The overall intellectual caliber of the comments on these posts is depressingly negligible.
Embarrassing actually.
But please, by all means, continue.
Liquidity pools are an excellent means of achieving outrageous APR’s, 20, 40, 60, 80% are not uncommon. Generally the higher the APR/Y the higher the risk, several have got hacked or Rug Pulled and many have lost big.
We were in the Pancake Bunny BUNNY pool and got smoked for 65k, the 180% APY wasnt so sexy after that!!
Lessons learned, our favorite pool for quite some time is Spooky Swap on the Fantom network
https://spooky.fi/#/farms
the BOO/FTM lp token pays 32% today and has shown very little impertinent loss in the past couple of years between FTM and BOO.
The also have an NFT you can buy and will boost your APY for holding it.
ETH is king shit in this world, the biggest, most secure, most stable, and moving to Proof of Stake at this time with Merge this month. ETH will pay between 6 and 12% for depositing/holding it.
Crypto has had a very nice rally since I posted last ETH was at 1000 or 900 even, pumped to 1800 in 30 days!! Not bad for a top 2 coin.
It is now treading water at 1700 and I imagine going down to hopefully below 1000 again, some say 400 will be this cycles bottom.
As the CB’s prepare to launch thier CBDC’s decentralized cryptos and a free market will be a necessary counter system to prevent full enslavement
Please, don’t be depressed. Or embarassed. No such thing as a dumb question.
Sticking point?
Spalling? Defunitions? Vague and anomalous concepts? Need help with general derision? Maybe it’s the glaring contempt that throws ya?
Sorry about negligible, Wife gotta slew of them, but i thought it was spelled differently.
Sure someone else will help out. People helping people. That’s what it’s all about!
Live in whatever Neo-Luddite world that you fancy, the Amish do, kind of.
The Glaring Contempt is not a product of philosophical or moral objection, few here posses the chops in terms of life action to stand so.
It is a product of lazyiness brought about mostly by age I assume.
Crypto is what’s next, no amount of flippant derision is going to change that.
The only thing that could possibly be changed, is who’s crypto is next. And this will indeed have massive implications for what this world looks like.
Age and wisdom? NOT a hand-in-hand guarantee.
[crypto-]
COMBININGFORM
concealed; secret:
The conspicuous absence of electricity, heat, food, and last but not least, potable water?
” And this will indeed have massive implications for what this world looks like.”
Fasting is exemplified in various tomes to sharpen one’s mental acuity. However, No Safe Water? Dead.
1 Timothy Chapter 6
10 For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.
Neo-Luddite? On Deck. By the spoonful.
something about assumptions?
goddamn these wall street types are smoking the good shit!
All crypto is a scam.
We don’t need more parasites making money from doing nothing, we need people to build and produce real tangible products.
Finance is a kind of manufacturing, they make bagholders.
Big time bag holders, and no bag is as big as the FRN bag, and everybody here is helping drag that sum a bitch around.