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Folks in the crypto community usually prepare for when a Bull-run trend commences before they can invest. Needless to say, countless other opportunities exist when an investor can obtain high yields. In that rationale, Yield Farming is among the newest projects that let users exponentially ramp up their crypto investments hassle-free. However, the Semantics that are part of yield farming can be a Gordian knot to unfold. For instance, not many folks understand it, let alone when to invest in the platform.
Luckily, as a big fan of lucrative crypto investment ventures, I find the following moments worth noting down when looking to invest in yield farming.
A bearish market represents an economy with losses and tends to have volatile crypto prices. Today, digital currencies are under pressure from various regulators worldwide.
This type of occurrence causes a fluctuating market where crypto values may plunge. Investors can leverage this opportunity by buying digital tokens and investing them in liquidity pools. That way, users earn more tokens as rewards for supplying liquidity into the platform’s pools.
In some scenarios, the blockchain network hosting these farming projects can encounter several challenges. Ethereum’s blockchain, for instance, previously had a scalability issue that leads to significant congestion. Such a challenge slows down the network along with the platforms running on Ethereum’s blockchain.
However, with the launch of Eth2, the network can improve its scalability and reduce the traffic level. Yield farmers can leverage this time to experience fluid services from projects leveraging a blockchain network.
Invest After Research
Investors need to find more information on the desired farming platform. By doing that, investors become fully aware of the platform’s goals and functionalities. Reviews from previous and existing users can also provide important information for yield farming investors.
Users also need to understand the type of APY rates that each platform carries and select the most appropriate one. In the end, investors gain confidence since the fear of losing their investments gets lower.
During the Platform’s Launch
Investors can take advantage of a new farming platform launching into the market. In most scenarios, DeFi protocols arrive in the trading arena with promising rewards. So users can take this chance and gather more tokens as the platform continues to establish itself.
Trends in the Yield Farming Space
Alternative blockchain networks began to emerge following the high gas fees on Ethereum’s blockchains. In that case, yield farming projects set out to find other network options to maintain a cost-effective system for investors.
One example of these alternative networks is the Binance Smart Chain (BSC), which hosts farming protocols such as PancakeSwap, Autofarm, and Venus Protocol.
At BSC, farmers can enjoy investing at lower fees and accumulate more yields due to the network’s popularity. Polygon is another type of decentralized network launched in 2017 as a layer two solution for Ethereum. Similar to BSC, farming protocols based on Polygon offer users affordable trading fees and quicker transaction executions.
Where Can I Farm?
The DeFi space hosts a wide variety of farming protocols, each with different types of returns. Examples include:
Aave operates as a non-custodial multichain ecosystem with locked assets worth $15.35 billion. Here, investors generate yield by depositing their assets on the protocol. Submitting assets also allows investors to borrow more digital coins.
Investors can choose to invest and maximize profits from the 20 cryptocurrencies that the protocol supports. What’s more, farmers at Aave can select their reward mechanism, which ranges between fixed and variable interest rates.
Ranking as the third DeFi yield farming protocol is Curve Finance, with locked assets totaling $11.27 billion. This decentralized exchange enables investors to supply assets into liquidity pools and earn lucrative liquidity tokens. Some of the pools available on Curve include sBTC, Compound, PAX, Ren, Y, and BUSD.
Compound introduces users to a money market economy where users can become borrowers or lenders. The protocol is an open-source platform running on Ethereum’s blockchain. Investors on Compound earn their income by supplying assets in pools and receive a continuous compounding interest. Among the digital assets that the platform supports include REP, ZRX, BAT, ETH, DAI, USDC, and WBTC.
Uniswap represents a decentralized exchange platform residing on the Ethereum blockchain. Unlike other exchanges which depend on order books, Uniswap uses liquidity pools to extend token exchange services. In terms of investment, farmers earn yields from supplying their digital assets to the platform. Thus, investors receive 0.3% of the trading fees equivalent to their pool’s share.
Why Invest in Yield Farming?
A majority of farming protocols in the DeFi sector provide lucrative rewards to investors. Interestingly, yield farming offers better rewards than what traditional financial systems have to offer. Investors only need to select the coins they believe have a long-term value with huge growth potential.
What’s more, these protocols extend functional products which investors can leverage on and secure adequate interests. At press time, the total value locked in liquidity pools of yield farming platforms stands at $8,372,515,732. This value is set to increase since investors are migrating into digital asset investments through the yield farming venture.