Focus On The DeFi Liquidity Pool

 

Focus On The DeFi Liquidity Pool The decentralized finance (DeFi) movement has been at the forefront of innovation in the blockchain space. What makes DeFi apps unique? They're unauthorized, which means anyone (or anything like a smart contract) with an internet connection and a supported wallet can interact with them.

In addition, they generally do not require trust in gatekeepers or intermediaries. What new use cases do these properties allow? One of the new concepts that has emerged is yield farming.

This is a new way to earn cryptocurrency rewards with your cryptocurrency using unauthorized liquidity protocols. It allows anyone to earn passive income using the decentralized ecosystem built on Ethereum and Binance smart chain or more.

As a result, yield farming may change the way HODL investors go in the future. Why keep your assets inactive when you can put them to work?

What is yield farming?

Yield farming, also known as liquidity mining, is a way to generate rewards with cryptocurrency holdings. Simply put, it means locking down cryptocurrencies and getting rewards.

It works with users called liquidity providers (LPs) who add funds to pools of liquidity. What is a cash pool? Essentially, it is a smart contract that contains funds. In return for providing liquidity to the pool, LPs receive a reward. This reward can come from fees generated by the underlying DeFi platform or from another source.

Some liquidity pools pay their rewards in multiple tokens. These reward tokens can then be deposited into other cash pools to earn rewards, etc. You can already see how incredibly complex strategies can emerge quite quickly.

How are yield farming yields calculated?

Typically, estimated crop yields are calculated on an annual basis. This estimates the returns you can expect in an APR (Annual Percentage Return) year.
It should also be borne in mind that these are only estimates and projections. Even the short-term rewards are quite difficult to estimate accurately.

Why ?

Yield farming is a highly competitive and fast-paced market, and the rewards can fluctuate quickly. If a yield farming strategy works for a while, many farmers will seize this opportunity and stop producing high yields.

Yield farmers typically move their funds a lot between different protocols in search of high yields.

Yield agriculture platforms and protocols

There is no set method for doing yield farming. In fact, yield farming strategies can change from hour to hour. Each platform will have its own strategies, rules and risks. If you want to get into yield farming, you need to familiarize yourself with how decentralized liquidity protocols work.

We already know the basic idea. You deposit funds into a smart contract and earn rewards in return. But implementations can vary widely. As a basic rule of risk management, you need to be able to maintain control over your investment. So what are the most popular platforms used by farmers? This is not an exhaustive list, just a collection of the most popular farming platforms.

PancakeSwap (BSC)
PancakeSwap is the automated market leader and the first billion dollar project on Binance Smart Chain. The decentralized exchange protocol has emerged as the top platform of the DeFi space with a current 24-hour trading volume of $ 450 million, leaving incumbents like Uniswap and Sushiswap behind.

Its native token, which was $ 0.48 when it was created, is currently trading at $ 11.

Liquidity providers can deposit cryptoassets into PancakeSwap liquidity pools to earn liquidity mining fees and rewards. In exchange for providing liquidity, they are given liquidity pool tokens (also known as FLIP tokens), which can be wagered to earn CAKE.

His yield farm still remains rich with more than 10 paires producing an annual return of 300% + at the time of writing.

Venus (BSC)
Venus is an algorithmic money market for decentralized lending and borrowing.