Why is yeild farming defi on trend?
What is DeFi?
DeFi or Decentralised finance has been attracting a lot of attention in recent years. It refers to financial services utilising smart contracts empowered by blockchain technology, which are automated enforceable agreements that replace the middleman such as lawyers and banks.
Most DeFi is built on the Ethereum network or the Binance chain. A popular application of DeFi is Decentralised exchanges, short for DEXs, which offers cryptocurrency trading services. Unlike other exchanges, Dexs are peer-to-peer, with no company or institutions as the intermediate.
DeFi also has many other applications, it would allow you to:
- Borrow and lend cryptocurrencies to earn interest
- Bet on the outcome of events
- Create and exchange derivatives of real-world assets such as currencies or precious metals
What is yield farming?
The yield farming craze started in 2020. It is a way to earn cryptocurrencies, by temporarily lending crypto assets to DeFi platforms in a permissionless environment.
Decentralised exchanges rely on investors who are willing to assist them by providing their crypto assets. For example, when a yield farmer offers liquidity to a DEX like Uniswap or Pancakeswap, the farmer earns a portion of the platform’s fee, paid out by token traders who access the liquidity.
Yield farmers can determine how long and how much they would like to contribute their assets. Farmers would earn fees daily; the more one lends, the higher the returns are.
Why is yield farming a good option?
High Returns passive income
Yield farming offers attractive high returns, at least a hundred times higher than the traditional banks. Additionally, it could be more profitable than many other conventional investments such as bonds and stocks with the right strategy.
Flexibility
There is no minimum or maximum to start yield farming with the most of farming platforms, and you can harvest quickly and at any time you want.
Other than the outstanding returns, some yield farming platforms also carry inspiring missions, such as Robinhood Swap, it is a yield farming platform to create a better society through charitable donations. A portion of total tokens (5%) reserved in RobinHood's pool will be donated to charitable organisations selected by their community.
