The world of defi is complicated, but some users have figured out how to get the most
out of their cash. If you want to enhance the profits on your cryptocurrency investments,
you might be interested in yield farming. Yield farming is the practice of generating
additional revenue from your crypto assets by utilizing defi technologies. So what exactly
is it? Disclaimer, I'm not a financial advisor. The video is for informational and educational
purposes only. Hey everyone. Welcome to crypto trends
In today's video, we'll talk about yield farming and how does it work? So make sure to subscribe
to the chat so you don't miss out on any of our videos. So without further ado, let's
get into it. What is yield? Farming? Yield farming is a method of generating extra cryptocurrency
with your existing cryptocurrency. It entails you lending your money to others. Through
the power of computer programs, known as smart contracts in exchange of services, you will
be compensated in the form of cryptocurrency. Isn't it simple? Not so soon though. Yield
farmers will employ highly complex tactics. They constantly shift their cryptos across
loan platforms in order to optimize their earnings. They'll also keep the top yield
farming practices, a closely guarded secret. Why the more individuals who are aware of
a plan, the less successful it becomes yield. Farming is the wild west of decentralized
finance with farmers competing for the opportunity to cultivate the greatest crops.
How does yield farming work yield farming entails depositing currencies or tokens into
a decentralized application or DAP in order to receive a return crypto wallets, decentralized
exchanges and other DS are examples. Decentralized exchanges are commonly used by yield farmers
to lend, borrow, or state coins in order to earn interest and speculate on price, volatility,
smart contracts, which are pieces of code that automate financial agree payments between
two or more people make yield farming possible through defi types of yield farming type number
one liquidity provider to provide trading liquidity users deposit two coins to a decentralized
exchange to switch the two tokens exchanges charge, a modest fee, which is paid to liquidity
per providers charge might be paid in fresh liquidity pool or LP tokens on request type
number two, lending coin or token holders can use a smart contract to lend crypto to
borrowers and receive interest on the loan type.
Number three, borrowing farmers can use one token as security for a loan. With another
token, the borrowed coins can be put to use in yield farming. This enables the farmer
to keep their initial investment, which may grow in value over time while simultaneously
paying interest on the borrowed coins type number four staking in the world of defi.
There are two types of staking on proof of S stake blockchains. A user gets paid interest
in exchange for pledging their tokens to the network as security. The second option is
to stake LP tokens obtained by providing liquidity to a decentralized exchange. Users can earn
yield twice since they're compensated in LP tokens for supplying liquidity, which they
can then invest to gain more interest calculating yield farming returns. In most cases, expected
yield returns are annualized over the course of a year. The potential returns are computed
annual percentage rate or APR and annual percentage yield, or PPY our two often used measurements
compounding reinvesting gains to generate bigger returns is not taken into account by
APR, but it is by API.
Remember that the two measurements are just predictions and gases and even short term
benefits are difficult to predict with precision why yield farming is a fast paced, highly
competitive industry with constantly changing incentives. If a yield farming approach works
for a while, more farmers will want to use it and it will eventually stop producing big
profits. Defi will have to create its own profit calculations because APR and P are
outdated market measurements due to Defy's quick speed, weekly or E even daily predicted
returns may make more sense. Popular yield farming protocols, curve finance curve has
almost 17 billion in total value, locked on the platform, making it the second largest
defi platform in terms of total value locked the curve finance platform with its unique
market. Making algorithm makes more use of locked money than any other defi platform,
which is a win-win strategy for both swaps and liquidity providers.
Curve offers a huge number of stable coin pools with competitive APRs that are linked
to Fiat. Currency curve maintains a high APR, which ranges from 1.9% to 32% stable loin
pools are relatively safe. As long as the tokens do not lose their P in permanent loss
can be avoided altogether because their costs do not differ much from one another curve.
Like all decentralized exchanges is vulnerable to short term losses and smart contract failure
curve also has its own coin CR-V, which is for curve Dao governance Ave. With over 10
billion in value locked up and a market cap of over 1.6 billion Ave is one of the most
extensively used stablecoin yield farming platforms. Ave A's native token is also available.
This token encourages users to use the network by offering benefits such as fee savings and
voting power in governance. yearn.finance is the highest earning coin on Ave with a
deposit PPY of 19.4, 2% and a borrow PPY of 53.7% uni swap uni swap is a decentralized
exchange that allows for no trust token exchanges to build a market liquidity providers invest
the equivalent of two tokens.
The liquidity pool can then be traded against by traders. Liquidity providers receive fees
from trades that take their place in the pool and change for providing liquidity. Uni swap
has become one of the most popular platforms for trustless token swaps due to its frictionless
nature. This is beneficial in agricultural systems with large yields uni uni swaps own
Dao governance. Token is also available pancake swap pancake swap functions, similarly to
uni swap. However, instead of Ethereum, it runs on the Binance smart chain or BSC network.
It also has a few other gamification related features on pancake swap. You can find BSC
token exchanges, interest earning staking pools, non fungible tokens, or NFTs, and even
a gambling game in which users guess the few, your price of Binance coin B and B pancake
swap faces the same risks as uni swap, including temporary losses as a result of large price
changes and smart contract failure.
Many of the tokens in pancake swap pools have small market capitalizations placing them
at risk of losing value. Pancake swap has its own token cake, which can be used on the
platform as well as to vote on platform proposals, risks of yield farming yield farming is a
complex procedure that puts both borrowers and lenders at danger of losing money. Users
are at a greater risk of temporary loss and price slippage. When markets are volatile,
the following are some of the risks linked with yield farming, rug, polls rug polls are
a type of exit scam in which a cryptocurrency developer takes money from investors for a
project and then abandons it without repaying, the money rug, polls, and other exit scams,
which are particularly vulnerable to yield farmers accounted for nearly all large fraud.
In the second half of 2020 regulatory risk. The future of cryptocurrency regulation is
still up in the air.
Some digital assets have been labeled securities by the securities and exchange commission,
bringing them under its authority and allowing it to regulate them. State regulators have
previously issued cease and assist orders against blocky Celsius and other centralized
crypto lending of says if the S E declares defile lending and borrowing to be securities,
the ecosystems could be harmed volatility. The degree to which the price of an investment
moves in either direction is known as volatility. An investment that exhibits a high price w
over a short period of time is considered volatile. All tokens are locked up. Their
value may decline or rise, posing a significant risk to yield farmers, particularly during
a bad market smart contract hacks. The smart contracts that enable yield farming are responsible
for the majority of the risks. Although increased code vetting and third party audits are improving
the security of these contracts. Defi hacks are still frequent before using any platform.
Defi users should undertake research and due diligence. What are your thoughts about yield
farming and what's your preferred yield farming protocol? Let us know in the comment section
down below with that being said, here we come to the end of our video. I hope you like this
video. And if so, then don't forget to subscribe to the channel. So you never miss any video,
see you in the next video till then take care. Thanks for watching.