Since the year 2020, yield farming has been a hot topic in the decentralized finance world. It has become a way to go for investors looking to gain maximum profits from their owned cryptocurrencies and other crypto-based assets. As a beginner, the concept of yield farming in the DeFi world may be unknown to you. Also, there are numerous DeFi protocols offering yield farming services to their users. So, how can you choose the best yield farming platforms to get started with without facing any hassle of checking out individual platforms and knowing about them? Here we have talked about the 7 best yield farming platforms for you in 2022.
7 Best Yield Farming Platforms in 2022
A large number of yield farming platforms have emerged in the DeFi ecosystem leading to investors facing confusion in deciding which platform to choose. The COMP token by Compound introduced the concept of yield farming for the first time. In a small period of time following the event, Aave also stepped into the trend and accounts for most of the fame gathered around yield farming. So, here is everything you need to know about these two protocols along with the five best yield farming platforms in 2022.
Aave
Aave is a cryptocurrency-based noncustodial and decentralized finance protocol where the users can lend their previously owned Aave tokens and borrow assets. The users earn compound interest on the assets that they have lent to the protocol. The total value locked in the protocol is around $14 Billion. In addition to this, the current market value of Aave is over $3.4 Billion. The additional rewards that people get by yield farming on Aave are fee savings and voting powers. The yields earned on this platform typically range from 4.78% to 13.49%. This is why Aave tops the list of the 7 best yield farming platforms in 2022.
Compound
As of August 2021, the Compound protocol gained a total supply of assets worth $16 Billion and the APY ranged from 0.21% to 3%. On this platform, the users can borrow and lend their assets while earning compound interest along with the governance token (COMP) for their investments in the pool. The best part about this protocol is that it is constantly audited and reviewed to prevent any security breaches.
PancakeSwap
PancakeSwap is a popular decentralized exchange on the Binance Smart Chain network. The primary use of this exchange is to swap your BEP20 token and the users trade their assets against a liquidity pool with the help of an automated market-maker model. Among the Binance Smart Chain networks, PancakeSwap has the highest total value locked at around $4.9 Billion as recorded in August 2021. The protocol focuses upon gamification features including lotteries, NFT collectibles, and team battles. The users can earn an APY up to 400%.
Uniswap
Uniswap is another decentralized exchange that works on the automated market-maker model. Here, the users can swap any pair of ERC 20 tokens. The liquidity providers must provide an equal number of tokens of both the token classes in order to earn a proportion of the transaction fee along with the native governance token of Uniswap. As of August 2021, the total value locked in two different versions of the protocol was around $2 Billion and $5 Billion.
Curve Finance
Curve Finance is basically a decentralized exchange. It is one of the largest exchanges in the crypto world. The total value locked in the exchange was equal to $9.7 Billion. The base APY of this platform was around 10% whereas the reward APY can go as high as 40%. It should be your most preferred platform especially if you wish to farm stable coins. It lets you farm coins while incurring very low fees and low slippage through its very unique market model.
Yearn Finance
It is a decentralized protocol that allows users to aggregate maximum yields. It allows the users to use various yield farming protocols like Aave and Compound. The algorithm of this protocol seeks out the most profitable yield farming services. Then it releases them to maximize the profits of the users. The protocol took the world by storm when its native token shot up in value to over $40,000 at the first stage itself. The total value locked in the protocol is over $3.4 Billion. The users of Yearn. Finance can earn an APY of up to 80%.
SushiSwap
SushiSwap is another decentralized exchange where users can trade their cryptocurrencies by an automated market maker model. The liquidity providers get the native SushiSwap Liquidity Pool Tokens for their willingness to provide their assets in the pool. In addition to the SushiSwap tokens, the users can also try their hands at various other sushi-based incentives like staking, liquidity pools, and swapping the tokens.
What Do You Mean by Yield Farming?
Yield farming is the process of earning secondary profits on your pre-owned cryptocurrencies by lending them or locking them into liquidity pools. The liquidity providers get rewards in the form of native tokens of the protocol, APY rewards, an increase in the capital, and revenues on the transaction fees. It is becoming largely popular among investors as it allows them to use their low-valued cryptocurrencies to earn rewards through a simple four-step process.
Yield farming involves lending the coins to the liquidity pool, and deciding whether to buy, sell, or trade the yield farming coins. Following that, the liquidity providers pay a certain fee depending on what they choose to do. They are then rewarded for the ability to give money to the pool. Then the investors can farm the rewards again and again till they obtain maximum profits on their investments.
Closing Thoughts
When choosing the platform to begin your yield farming practices, it is important to know the platform’s interface. Also, you must be aware of your individual objectives for what you want to get out of the practice. It is because each platform offers a different set of rewards to the users. If you are a beginner, you should not lend all of your tokens to the liquidity pool to avoid losses, if any.
