Why Is DeFi Yield Farming Platform The New Lucrative And Rewarding Venture In The Crypto Space?
What if someone told you that you could use your cryptos to earn more cryptos? With DeFi yield farming, users can now access multiple avenues to make big bucks in the crypto space. Yield farming’s market cap has risen to nearly 10 billion dollars in 2022. With such a huge market, we can safely say that yield farming is the growth driver of the DeFi space.
Yield farming is a passive method of investing and earning from cryptocurrencies. There are only a few risks involved with DeFi yield farming. Therefore, many entrepreneurs have started seeing DeFi yield platforms as a remunerative business opportunity and have begun developing their own DeFi yield farming platforms. Let’s delve a bit deeper into DeFi-yield platforms and explore how it could be a lucrative business venture.
DeFi yield farming
DeFi yield farming is the process of lending crypto tokens to those who need them and earning interest in the process. Yield farmers need to move their funds around different platforms to gain maximum gains out of it. It can look simple for some, but one might need to deploy some complicated strategies to make it big in yield farming.
How DeFi yield farming works
DeFi yield platform works with the cryptos in it and the users known as liquidity providers. Liquidity providers lock their cryptos on the platform for which they are provided with interest or fee generated from the underlying platform. The token lending takes place through smart contracts without the intervention of third parties.
In layman’s terms, a yield farmer acts as a bank that lends coins into the DeFi market, providing interest for the lenders. The workflow of a DeFi yield farming platform is:
Liquidity providers deposit their funds into liquidity pools. These funds are then locked by smart contracts.
These liquidity pools control the platform where users can lend, borrow and exchange funds. Liquidity providers get benefitted according to the value of their funds.
Liquidity providers get remunerated for locking funds in the liquidity pools.
Tokens or rewards get deposited in the liquidity pools. Liquidity providers can use this opportunity and build complex investments by shifting and reinvesting tokens in other liquidity pools to yield more profits.
Propositions of DeFi yield farming
You can reward your users on your yield platform for adding liquidity to your yield platform:
➽ Exchange fee: Reward your users with a share of the pool’s exchange fee charged for swapping tokens.
➽ Liquidity tokens: You can provide liquidity tokens to your users to give liquidity to the platform. These tokens can be staked to get more tokens.
➽ Governance tokens: You can reward your users with governance tokens that give them decision-making powers in the platform.
Popular DeFi yield farming platforms and protocols
The success of any DeFi yield platform depends upon the yield protocols and platform that is used. The knowledge of yield protocols can help investors make informed decisions with fund allocation for higher returns.
➽ Compound Finance: Users can borrow and lend assets. Liquidity providers can add funds to the pool and get rewards that initiate compounding. The compound rate is adjusted based on supply and demand.
➽ Synthetix: Yield farmers can invest in Synthetix Network tokens and can get synthetic assets in return. Users can attach any financial asset to the Synthetix platform for yield farming.
➽ Uniswap: Uniswap is a widely used platform for yield farming for its frictionless nature, allowing users to deploy new yield farming strategies.
➽ Balancer: One of the unique features of Balancer is that it allows custom token allocations in its liquidity pools. Liquidity providers can create custom pools and get trade fees in liquidity pools.
➽ Yearn.Finance: Yearn. Finance is an aggregator for leading lending services like Compound, Aave, etc. It provides premium strategies for yield farmers looking for protocols.
To conclude:
yield farming is an emerging mechanism in the DeFi space. It has the potential to be the next big thing in the DeFi space. The concept of staking and locking currencies for higher returns has intrigued many users around the world and has opened up many new revenue opportunities in the DeFi space. The craze and buzz around DeFi yield farming platforms have made it a lucrative business opportunity in the crypto space. If you’re an entrepreneur looking to develop a DeFi yield farming platform, you can hire a professional DeFi development company for your yield farming platform development for a first-class finished product.
