Birdeye Guide: Leverage Yield Farming on EVM Chains for Sustainable Returns
Yield farming is one of the lucrative investment strategies for crypto investors and traders to earn passive income on their cryptocurrency holdings. By choosing their protocol and strategy carefully, yield farmers can earn high returns on their deposits.
Keep reading to learn more about yield farming, well-established platforms on EVM chains to earn yields, and some tips we thought could be helpful for you!
Understand yield farming
Yield farming is a way to earn cryptocurrency rewards by providing liquidity to decentralized finance (DeFi) protocols, i.e. a decentralized exchange (DEX). Yield farmers can deposit cryptos into a protocol’s liquidity pool of tokens for other users to trade against. Basically, the farmers are providing liquidity for that protocol to activate its automated market-making (AMM) algorithms and get it to function properly.
In return, yield farmers can earn rewards in the crypto they deposited or in the native token of the liquidity platform they are using. The payouts can vary depending on the calculation of each protocol, which pair of tokens you’re depositing into, and a few other factors.
Yield farming on major protocols
Users can yield-farm on DEXes and protocols on many chains, the majority of which are on Ethereum or EVM-compatible chains. EVM chains, such as BNB Chain, Optimism, Arbitrum, Polygon, and many others, offer lower transaction costs than Ethereum while benefiting from its security and network effects.
Here are a few examples of top DEXes and protocols on Ethereum and EVM-compatible chains that offer yield farming for crypto traders and investors:
- Uniswap: This is one of the major DEXes on EVM chains that provides a good variety of pools for yield farming. It’s known amongst users for offering high token-value locked (TVL) pools and a user-friendly interface. Its latest version, Uniswap v3, provides several enhancements, such as improved capital efficiency and more adaptable price structures.
- Sushiswap: This is a liquidity platform with comparable yield farming opportunities to Uniswap’s. Sushiswap is renowned for offering desirable rewards for yield farmers, distributing 25% of trading fees to liquidity providers. The payout is in SUSHI token, which can then be staked on the platform again for additional profit.
- Aave: This is a DeFi platform for crypto lending and borrowing. Users can lend crypto to borrowers via Aave’s liquidity pool and earn yields from doing so. Users who borrow from Aave will have to pay an interest rate of up to 30%+ annual percentage yield (APY), from which could offer the lenders a good share of earnings. Aave’s lenders could speculate their yield via this Google Sheet provided by its team.
Some tips for yield farming on EVM chains
To optimize earnings from yield farming on EVM chains, you could consider:
- Farming stablecoin liquidity pools. Stablecoin liquidity pools have the potential to provide attractive payouts and are generally less volatile than other pools. To reduce the chance of transient loss, it is crucial to select pools with a large trading volume or TVL.
- Using a yield aggregator. Yield aggregators are a set of smart contracts that pool investors’ crypto assets (tokens) and invest them in a portfolio of yield-paying products and services through pre-programmed and automatically executed strategies. Yearn Finance and Beefy Finance are two of the more popular yield aggregators for security and reliability. Yield aggregators can simplify the process of yield farming and help users maximize their returns.
- Monitoring your investments regularly. Keep a close eye on your investments and make necessary modifications at any time. For instance, if the risks alter or you are not happy with the returns, you may want to consider rebalancing your portfolio or removing liquidity from a pool.
- Farming high-yield assets. There are many high-yield assets available for farming that are typically more volatile. It is important to do your research and understand the risks involved before providing liquidity for them.
- Using leverage to amplify your returns. Leverage can help you to amplify your returns, but it can also amplify your losses. It is important to use leverage carefully and understand the risks involved.
We hope that this blog post has provided you with some helpful insights for yield farming on EVM-based protocols and DEXes.
Disclaimer
Birdeye only serves as a supporting tool to help users make informed trading decisions, not giving them financial advice! Please always conduct your own research and take responsibility for all of your investment decisions.
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