There’s thousands of digital currencies, but what are you supposed to do with them?
How about make more digital currency?
Yield farming is a relatively new thing in decentralized finance, DeFi. Earn interest on your idol coins.
Putting capital to work just got easier. Automated market making protocols like Compound and Uniswap offer incentives for users to lend out their cryptocurrencies for fixed or variable interest in the form of a stablecoin or governance token. This is yield farming.
Compound and Aave are primary lending and borrowing protocols. Users connect their wallet to a smart contract and lend their coins to start earning returns immediately.
Uniswap and Balancer are decentralized echanges (DEXes) that use liquidity pools allowing users to swap token. Users deposit their asset’s into the protocol’s pools in exchange for fees.
Yield farming is evolving as new projects come online with variations in their protocol design. YFI has multiple pools generating different returns for liquidity providers earning YFI. YFI is the the governance token and is only distributed to farmers. Its value has skyrocketed from $0 to $6,700. BASED is experimenting with a protocol incorporating an elastic supply that resets once every 24 hrs targeting a $1 BASED value.
At the time of writing this there’s more than $6B locked in these DeFi protocol yielding millions of dollars in tokens. All of these tokens can be immediately swapped for stablecoins or more widely adopted cryptocurrencies like bitcoin.
As they say, “farming is a profession of hope” and it’s very early for yield farmers, but these protocols are non-custodial and do offer alternatives to the average bank savings rate 0.01%.
Cheers,
Verks
***This is not financial advice. Investing in bitcoin and cryptocurrency is extremely risky. Please do your own research. The ideas and news presented in this newsletter are my personal opinions and meant for informational and entertainment purposes only.