What is Yield Farming In DeFi?

Understanding The Yield Farming Concept

Yield farming is the practice of staking or lending crypto assets in order to generate high returns in the form of additional cryptocurrency. Yield farming protocols incentivise liquidity providers (LP) to stake or lock up their assets in a smart contract known as a liquidity pool. When someone offers liquidity to the pool, they will get a reward. In some cases, the reward is a share of the pool’s trading fees. Other platforms may issue governance tokens as a reward. Governance tokens are cryptocurrencies that represent voting power on a blockchain project. Lastly, a percentage of interest from lenders may be offered.

At first, most yield farmers staked well-known stablecoins USDT, DAI and USDC. However, the most popular DeFi protocols now operate on the Ethereum network and offer governance tokens for so-called liquidity mining. Tokens are farmed in these liquidity pools, in exchange for providing liquidity to decentralized exchanges (DEXs).

The Standard Does Things Differently

Unlike other protocols, The Standard focuses on combining the yield farming of crypto currencies as well as physical assets such as gold. Therefore this project taps into the $10 Trillion + as of yet untapped market for yield farming.

Moreover, considering how The Standard doesn’t force users to relinquish their existing assets when borrowing the S-EURO — or other supported stablecoins — there is a significant opportunity. In essence, as long as one can repay the loan on time, the S-EURO can be used to farm yield in DeFi and while the leveraged asset is retained. This can be extremely useful for someone who has invested in a specific asset with the notion of benefiting financially from the long term returns from that investment. Take Bitcoin for example. Most who invested in BTC early on undoubtedly would not like to give up ownership of these just to reap the rewards from yield farming with them. The Standard thankfully provides a win-win solution. The Standard creates many opportunities for holders of real-world assets and cryptocurrencies alike.

It is also worth noting that, stablecoins with a loose peg to the value of the Euro (or any other currency for that matter) does not suffer from price fluctuations. Therefore, it is a low-risk — or even risk-free — asset to begin exploring yield farming opportunities with project such as The Standard. That same concept will apply to other stablecoins. If you are interested in learning more or are considering beginning yield farming for the reasons just mentioned please check out The Standard Whitepaper.