At the end of 2017 and the beginning of 2018, ICOs and newly created Ethereum tokens were making the biggest headlines in the cryptocurrency space, asides from Bitcoin. But those days are now gone. New technologies have stepped up to take their place. Decentralized finance and DeFi protocols have taken over the blockchain industry and given birth to yield farming.
This innovative new approach to profit-making is based on smart contracts and has already earned early investors incredible capital gains. But what is yield farming, and can I profit from it short term? In our guide, we will explain what you can do to put your cryptocurrencies to good use and return high yields.
What is Yield Farming?
Yield Farming is also known as liquidity mining. It involves earning capital gains by allocating your cryptocurrencies to various liquidity pools and DeFi protocols. The users can lend or borrow DAI, USDT, USDC, Ethereum, and several other assets from different DeFi platforms.
The users who invest their funds are known as yield farmers, and they become liquidity providers to DeFi projects. Some liquidity pools provide a fixed rate, while others offer a variable rate on user investments.
The easiest way to become involved with and have success in yield farming is by lending, borrowing, and trading on the most popular DeFi platforms in the space. That is the way to achieve higher yields and bigger rewards.
Which DeFi protocols Offer the Biggest Yield Potential?
Defi Pulse has created a nifty site that tracks the most widely-used platforms and shows the total value locked in these smart contacts. There is currently over $6.5 Billion worth of digital assets locked in 38 global DeFi projects.
Investors are drawn to these sites due to the incredible profits they can make. Even centralized exchanges, like Coinbase, are trying to get a piece of the action by listing DeFi tokens, such as the COMP token, on their platform.
Among the best-known brands we can find:
- MakerDAO
- Uniswap
- Compound Finance
- Balancer
- Synthetix
- InstaDApp
- Aave
- Curve Finance
- WBTC
