Yield Farming: The Rocket Fuel of DeFiFarms
Bringing high profits and numerous support for projects in terms of liquidity, Yield Farming solutions on DeFiFarms also contain plenty of outstanding features by applying NFTs protocol.
What is Yield Farming?
Yield Farming or profit farming is about users trying to create as many earnings as possible from their crypto assets through providing liquidity for DeFi protocols (Decentralized Finance — Decentralized Finance).
Essentially, Yield Farming is almost like you depositing money in the bank. However, instead of depositing fiat, you are depositing cryptocurrencies into exchanges or DeFi protocols. The Smart Contract will lock this expense.
Yield Farming is intimately associated with the Automated Market Maker (AMM) model. Popular AMM models include Uniswap, Mooniswap, Balancer, etc.
In Yield Farming, Liquidity Providers contribute liquidity to the protocol’s liquidity pools. A liquidity pool is simply a smart contract that carries money in it. These pools allow users to borrow, lend or exchange tokens.
Liquidity Pool makes the acquired charge of transaction payment when end-users perform actions in the pool, such as taking, lending, exchanging tokens. This revenue will be distributed back to the Liquidity Provider according to the percentage of liquidity they have presented in the pool.
Besides incurred costs, some protocols also implement liquidity bootstrapping for the order by dividing native tokens to Liquidity Providers that have provided liquidity to their protocol (either over the protocol pool or a specified pool number) called Liquidity Mining.
The evolving journey of Yield Farming
The Yield Farming model quickly became a hit when this launched on the peer-to-peer lending platform Compound in 2017. The increased demand for tokens started the current Yield Farming craze in an automated distribution way and brought Compound to the position — leader in the DeFi market.
In addition, Compound took an essential role in delivering this model, has become more popular, and created a strong attraction for crypto investors. Since then, other DeFi projects have come up with innovative methods to attract liquidity to their ecosystem.
The heat of Yield Farming so far has not given any signs of cooling down. Especially in the early stages of 2020, when Compound announced that they wanted to decentralize the product and proffer some ownership to the users who helped them convert big. That ownership will take the form of COMP tokens.
Another reason for this tendency is that liquidity mining helps to increase yield farming hugely. Liquidity mining is when the yield farmer receives new tokens and regular profits in exchange for farmer liquidity.
“The idea is that stimulating the usage of the platform increases the value of the token, thereby creating a positive usage loop to attract users,” said Richard Ma of Smart-contract auditor Quantstamp.
Furthermore, Yield Farming adequately encourages projects in terms of liquidity. This platform also benefits both lenders and borrowers. Yield Farming helps everyone to have entrance to capital in the world of DeFi finance.
Certainly, Crypto users are frequently taking DeFi applications seriously because they know where to generate brand new yields. In particular, all of the new liquidity creation solutions of Yield Farming are considered the cleverest and most reasonable strategy.
The optimizations of Yield Farming on DeFiFarms
The combination between Yield Farming and NFTs is not something new in the crypto community. However, from 2020, this trend began to return due to the concern of investors in transaction security.
A non-fungible token (NFT) is a type of collectible cryptographic item developed from this idea. Unlike cryptocurrencies, where all tokens are created the same, each non-fungible token (NFT) is a unique and limited version.
NFT is calculated to be one of the significant stands of a new digital economy that is created by Blockchain. There are many projects that are using NFT for a variety of applications, such as games, digital identities, licenses, certificates, and artwork. Including high-value items, NFT can even permit users to have an ownership rate.
Embracing that opportunity, DeFiFarms was produced as one of the first NFTs Protocol Powerful Automatic Liquidity Acquisition Yield Farm and AMM decentralized exchange running on Binance Smart Chain
The solutions of DeFiFarms assure to overcome the security insufficiencies of the traditional Yield Farming model. Notably, most of them are security-based on Smart Contracts that are developed by small groups whose capital ratio is not much, so this will increase the possibility of bugs. Even though the protocols have been audited, there is still the probability of bugs and errors. If you remembered, these things caused the problems of stolen money as in the case of Bzrx, Curve… not long ago.
DeFiFarms helps users stake and lend crypto assets, thereby generating huge rewards as different cryptocurrency is added to their balance. The DeFiFarms project yield farming section helps incentivize the liquidity providers, locking up their tokens and gaining from distribution of profits acquired through smart contract efficient management of the liquidity pool.
“By using NFT, DeFiFarms allows stakes to be more dynamic. Instead of a stake being tied to a user’s wallet address, it is linked to proof of ownership, transferable NFT”, the developers of DeFiFarms explained. “Meaning, when you become a Liquidity Provider and stake your tokens, you do not only earn rewards but also receive an NFT of equivalent value called NFT Farming”.
DeFiFarms yield farming rewards will be according to earnings from the bounty reward pools, liquidity pools funded by DeFiFarms finance, or other organizations. DeFi Yield farming allows the cryptocurrency holders to lock up their holdings while expecting adequate rewards. Furthermore, it helps users earn fixed or variable interest while investing their crypto in the DeFi market. In other words, the yield farming lending cryptocurrency with the aid of the BSC network. In the traditional banking system, when funds are loaned out, they are paid back with interest. The idea is similar to yield farming as regards cryptocurrency. A certain amount is loaned out with the aid of DeFi protocol instead of storing it in a particular wallet to get a return.
On promptly entering the NFT application, DeFiFarms envies a more reliable and more advantageous exchange to users. The goal of DeFiFarms is to be a trustworthy and committed DeFi platform and implement the continuous growth of this decentralized financial address along with safety transactions for users.
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