The decentralized finance (DeFi) market offers users alternative earning tools. In particular, Yield farming is one of the main tools that allows users to make passive income, which leads investors in the direction of receiving income through blocking assets for the needs of startups, most of which operate on the Ethereum blockchain.
Yield farming is a movement whose participants strive to squeeze maximum profit out of their investments through DeFi protocols. The title can be explained by the way of the work of crypto farmers – they “grow” their income from previously “sown” investments. In order to achieve the goal, investors use various protocols and platforms. Now let’s explore some of the fundamental protocols utilized in the yield farming ecosystem.
Popular Crypto Yield Farming Platforms and Protocols
Among all the offers for profitable farmers in the decentralized finance market, there are leaders – platforms whose users have access to the best conditions for making money on investments in protocols. The editors of The VR Soldier have compiled the best DeFi platforms for Yield Farming:
Compound is an algorithmic money market that permits users to lend and borrow assets. Individuals with an Ethereum wallet can contribute assets to Compound’s liquidity pool and earn rewards that commence compounding immediately. The rates are dynamically adjusted based on supply and demand.
Maker is a decentralized credit platform that facilitates the creation of DAI, a stablecoin algorithmically pegged to the value of USD. Anybody can start a Maker Vault where they can lock a number of collateral assets, such as ETH, BAT, USDC, or WBTC. They are also able to generate DAI as debt against the locked collateral. This debt accrues interest over time, known as the stability fee, at the rate set by Maker’s MKR token holders. Yield farmers may utilize Maker to mint DAI for deployment in yield farming strategies.
Aave (One of The Best Platforms for Yield Farming)
Aave is a decentralized protocol for lending and borrowing. Interest rates are algorithmically adapted based on prevailing market conditions. Lenders receive “aTokens” in exchange for their funds. These tokens commence earning and compounding interest immediately upon deposit. Aave also supports other advanced functionalities, such as flash loans.
Uniswap is a decentralized exchange (DEX) protocol that facilitates trustless token swaps. Liquidity providers deposit the equivalent value of two tokens to establish a market. Traders can then transact against that pool of liquidity. In return for providing liquidity, LPs earn fees from the trades executed in their pool.
The platform “Curve Finance” is a decentralized exchange protocol tailored specifically for efficient stablecoin swaps. Curve aims to enable users to execute significant stablecoin swaps with relatively minimal slippage.
Yearn.finance is a decentralized ecosystem of aggregators for lending services, such as Aave and Compound. Its goal is to optimize token lending by algorithmically identifying the most lucrative lending services. Funds are converted to yTokens upon deposit and subsequently rebalanced periodically to maximize profit. Yearn.finance is beneficial for farmers seeking a protocol that autonomously selects the best strategies for them.
Synthetix is a protocol for synthetic assets. It enables anyone to lock up (stake) Synthetix Network Token (SNX) or ETH as collateral and mint synthetic assets against it. Synthetic assets can be conceptualized as tokenized derivatives that leverage blockchain technology to mirror the value of their underlying assets. Hence, they provide an accessible means to hold and trade assets without actual ownership. Virtually any financial asset, such as stocks, altcoins, or options contracts, can be incorporated into the Synthetix platform.
Conclusion About Yield Farming
In the DeFi market, investors can find many offers for organizing passive income. At the same time, market participants can simultaneously work on several platforms. To receive maximum income, you need to regularly analyze the offers of DeFi protocols and promptly move assets to more profitable sites. Yield farming might seem a little bit confusing due to the many technical terms and complex strategies involved. However, in fact, the goal of the movement can be described in just one phrase – achieving maximum income using DeFi protocols.