YEILD FARMING

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Hello fellow community members today I will be talking about the yield farming aspect of the crypto world, I hope this broadens your image of Yield farming a little bit more

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YIELD FARMING

Yield farming otherwise known as Yefi in the crypto world can be explained as a process in which individuals lock their assets on a platform for a specific period of time to earn more assets or we could explain it as a process that allows liquidity providers i.e individuals to provide liquidity to pools with the sole aim to earn or attain more assets over a period of time, In a layman's term we can describe yield farming as a passive way to earn extra cryptocurrency with your cryptocurrency
The yield farming process runs very similar to the centralized banking system we have in place currently where the banks provide help in the form of assets or cash in exchange for something of equal value but with a slight increase in value aspa an interest. In the case of the yield farming, the roles are reversed the liquidity providers i.e the individuals serve as the banks who lock assets (liquidity provider tokens) in pools( the recipient in this case) over a certain period of time to get paid back after a certain period of time with something of equal value but with a specific increase in value depending on how long the assets are locked out for in the pools. Below are some Yefi projects

• Aave
• Uniswap
• Curve Finance
• Pancakeswap
• Sushi Swap e.t.c

Yield farming is often calculated using the Annual Percentage Yield (APY) or the Annual Percentage Rate(APY) these terms although used one for another actually have a difference, APY calculates interest with the compounding factor in place while the latter doesn't.

ADVANTAGES
LUCRATIVE
You get to earn more assets for literally doing absolutely nothing but waiting, this is one huge aspect of the yield farming you end up with more assets than you began with initially, and the interest rates are very good so if a large amount of liquidity token is locked a very considerable amount will be earned regularly
PRIVILEDGE
When you have a certain token locked away in the yield farming platforms you are given some certain right to vote or make contributions aspa decision wise in the platform
VOLATILITY GAINS
In some cases while your assets are locked away for a long time apart from the usual Percentage you are earning you can wake up and meet your locked away asset value has inflated by a lot hence leaving you with a lot of profit
DISADVANTAGES
HIGH INVESTMENT CAPITAL IS REQUIRED
If an individual starts yield farming with a small amount of asset the interest he accumulates 9ver a long period of time is often nothing to write home about, to earn significantly you have to lock a very significant amount of asset
DEFLATION
While your asset is locked away over a long period of time you might unlock it one day only to find out it jas list more than half its value and its only worth half of what it was when you locked it
CHANGES IN RETURN RATES
Say for instance you locked your asset in 2020 when the return rate of the yield farming platform was 100% and in 2021 the RR was slashed in half, you will start to earn half of what you were earning initially

CONCLUSION

If you are looking to make some passive income in the crypto world the Yeild farming might be a big step up for you, although to maximize profit in the aspect one would need to do a lot of rigorous research and move his cryptocurrency quite a lot to get the most.
Thank you all for stopping by