Defi Technology has been implemented until now it has created more impact on the crypto market. Thus it makes more valuable meritorious changes in the financial system. Normally traditional banking sectors, people mindset have invested their money into a savings deposit or else in a Fixed deposit to earn some ratio interest money from their banks. The same concept in the crypto industry is called Defi Yield Farming. If anyone can put their crypto coin or token into a decentralized application (DApp) for example to give an idea DApp includes crypto wallets, DEXs, Decentralized Social media and so on. Typically yield farmers are choosing Defi exchange to lend, borrow, or stake coins to reap interest across them these platform-based activities are incorporated with blockchain-powered smart contracts between two or more parties.
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Types of Yield Farming
Liquidity provider: If an investor deposits two coins into DEX to provide trading liquidity. Defi Exchanges charge a small fee to swap two tokens which are paid to liquidity providers. Sometimes these fees can be paid in new liquidity pool (LP) tokens
Lending: This process of lending is a crypto coin or token that can lend to crypto borrowers with the help of smart contracts and earn yield interest from a loan
Borrowing: A Crypto trader can use one token as collateral and receive a loan from another. This Credit token can be used for farm yield. The farmer keeps their holding, which may increase over a period of time while also increasing borrowed coins.
Staking is a well-known way to earn passive income on a crypto token. When stake your digital assets or tokens in a liquidity pool they will be rewarded commission as LP tokens.
Defi staking is no vaguer because most people's mind thoughts have more difficulty. Holding up cryptocurrencies or token in a crypto wallet for a certain period of time after getting some Staking rewards. Anyone can join this Defi crypto staking platform on any blockchain network operating a Proof-of-stake (POS) mechanism. It has several variations to allow users to participate in DeFi Staking Platform. Most of the crypto exchanges have already implemented Staking features.
Why did Yield Farming gets boomed?
The reason for the Yield farming boom is the launch of COMP Token - a governance token of the Compounded Finance system. Governance token grants permission to governance rights for the token holders but the way governance tokens will often be algorithmically distributed with liquidity incentives in the decentralized blockchain. Yield Farming's main success is providing liquidity tokens by holding up digital assets. It has changed more reforms in the Defi sectors to get more attention acquired and also it gets more impacts on price fluctuation to succeed.
Famous Defi Yield Farming platforms & protocols in Market
Curve Finance
The curve is the highest Defi platform because it acquires a total value of Defi assets locked up at nearly $19billion. Trustable both Swappers and liquidity suppliers have obtained this platform. This trust growth reason is specifically designed for efficient stable coin swaps. It allows users to make a high-market value stable coin swap with relatively in low slippage.
Aave
Aave is one of the decentralized protocols for lending and borrowing. Aave token interest rates are algorithmically adjusted based on current market trends and also it provides advanced functionality features of flash loans. These Defi protocols are used by most Defi yield farmers doing activities like lending and borrowing.
Uniswap
Uniswap is one of the famous decentralized exchange protocols it allows users to occur token swap with trustless. Liquidity providers can invest an equivalent value of two tokens to build a new market. This platform gives traders can trade against the liquidity pool. In return for contributing liquidity, liquidity providers obtain fees from traders it happens in a pool.
Pancakeswap
Pancakeswap is most similar to Uniswap. It also runs on Binance Smart Chain (BSC) network rather than on Ethereum. In more value-added features like Non-fungible tokens (NFT), BSC Token Exchanges, staking pools and so on. If your stake token when Pancakeswap rewarded the token is called cake.
How does it Work?
General people have thought about yield farming is investing in cryptocurrencies, tokens, and stable coins are not yield farming. Lending digital assets into the Defi protocol and forming an earning opportunity to earn interest or reward is yield farming. In simple Defi yield farmer, play a role as a bank, lending coins & tokens into the Defi market. It will be provided interest or reward of token for the lenders. The main backbone of Yield farming work with a blockchain-powered smart contract that connects both lenders and borrowers and handles the rewards to be paid to the investors.
List of Famous Defi Tokens in the Market
- Terra
- Avalanche
- Wrapped Bitcoin
- Dai
- Chainlink
- Uniswap
- Compound
- SushiSwap
- Maker
- Aave
Conclusion
Yield farming is an emerging technology in Defi Industry. In every industry has different forms of risks have occurred but every risk is you tackle that problem to get success in a chance of time. Like that Defi Yield Farming Development is an interesting way to reach victory in your career