Most of you have already noticed it: There is a gold rush going on in the wild wild land of crypto. It`s a rush where some early farmers have earned a lucrative yield on their crypto. These guys aren`t investors, traders, or stakers, they are simply farmers, yield farmers to be exact.

My name is Cryptonator`s and my job is to guide through the wild wild land of crypto. So what is Yield Farming, what are the risks associated with it, and how can you farm the highest yield available on the market? Well, that's exactly what this post is about. Guys, let`s hit the fields!

What is Yield Farming?

Yield Farming is actually a pretty broad term. This term refers to chasing yield in the space of Decentralized Finance (DeFi) by lending, borrowing, and providing liquidity. Interoperable Protocols are used to enhance that yield. All these new opportunities are possible through Decentralized Finance and everyone can participate. There are already lots of different decentralized applications (dApps) in the DeFi space and most of them are replications of the services that we know from the traditional centralized finance system.

Today, there are already more than one billion dollars locked up in DeFi protocols like Compound Finance, Synthetix, and Uniswap. If you ask me, this shows the huge potential of DeFi and Yield Farming.

So the question is: Why just hodl your crypto if you can make some hay with it?

The Risks Of Yield Farming

We have to face it, there are certain risks involved when it comes to yield farming, no matter what DeFi platform you are choosing. So before you invest in Yield Farming, make sure to evaluate the associated risks. The fact is that you can not maximize your yield without accepting the risks. It would be irresponsible to say that there are no risks at all.

One of the biggest risks when it comes to Yield Farming, especially when it comes to providing liquidity on a decentralized finance platform, is the risk of an impermanent loss. An impermanent loss is a temporary loss of funds and it can be observed in standard liquidity pools. It's one of the dark secrets in the DeFi space and some inexperienced users are completely unaware of that risk.

The risk of impermanent loss happens in an arbitrage opportunity. The thing is that the liquidity provider has to provide two assets in the correct ratio. If one of the assets in the pool is very volatile and its price goes up and down, then also the ratio changes. If the liquidity provider doesn`t take any action to correct the ratio, then so-called arbitrageurs will do it and take away some of your funds. The result is that the impermanent loss becomes permanent.

Another big risk of yield farming protocols is hacker attacks as the protocols contain bugs and mistakes. These hacks are happening regularly and millions of frozen funds are gone with the hackers. The issue of DeFi protocol exploitations is actually becoming worrisome.

Farming The Highest Yield

If you are willing to take the risks described above, then you can start making some hay. As an ambitious farmer as you are, you want to fam the highest yield available on the market. So how to find the most profitable yield to farm?

One possibility is to check websites like CoinGecko for the top yield farming pools and choosing one of them.

Another very interesting option to maximize your yield is Harvest Finance. Harvest Finance automatically farms the highest yield available from the hottest Decentralized Finance protocols. Harvest Finance then also optimizes the yields that are already farmed by using the latest farming techniques. 

This is a screenshot taken from the harvest Finance homepage. The process of yield farming is pretty simple and straight forward.

Connect your wallet, deposit your assets, and the farming starts.

One important thing is that Harvest Finance is completely eliminating arbitrage risk by allowing you to deposit a single wrapped asset. This is a big advantage compared to other platforms. However, the risk of being hacked, on the other hand, is still there like on any other DeFi protocol, no matter if it's audited or not. 

My Final Thoughts

The fact is that if you want to participate in the gold rush, you also have to accept the risks. Personally, I am only investing as much in yield farming as I am also willing to lose. That`s how I evaluate the risks. I am not only holding, I am making some hay but with caution.

At the end of my post, I also like to remind you that my intention in this post is to raise your awareness of Harvest Finance and Yield Farming and my intention is not to replace your own research. However, it really reflects my own opinion.

So I hope that I could provide you with some interesting and useful information about Harvest Finance and Yield Farming.

Thank you guys as always for reading, liking, following, and tipping 👍

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