The new trend in the world of cryptocurrencies is known as Yield Farming: it’s defined as the use of cryptocurrencies in decentralized finance protocols (DeFi) to take advantage of the high rates of return of such platforms.
To know how it operates, it is necessary to review the term DeFi, which can be defined as a movement that encourages the use of decentralized networks, in order to develop different types of services and financial products. The objective is to create and operate financial DApps, for example, for the development of stablecoins, lending platforms between peers or groups with the confidence generated by the smart contract, or tokenization finance instruments such as DEX.
According to the https://defipulse.com/ site, there are more than $ 2 billion of crypto assets blocked in DeFis right now, which means that it’s users are providing more and more value to work in the Dapps of this ecosystem, driven largely by the introduction of new governance tokens, which will allow it’s users to take part in the future of these DeFi.
Without a doubt, it’s one of the most innovative and high-performance strategies for managing capital of the crypto ecosystem in recent months. Whoever participates in this activity seeks to take advantage of the high liquids that DeFi currently have, to generate high rates of return, focusing mainly on hobbling or requesting cryptocurrencies in collateral loans, or backed by other digital assets.
Just as in organic seeding cycles, also in Yield Farming, since a user through a cycle of operations commits his digital assets, mainly through loans, this allows him to earn interest on the funds he commits, which will be higher, the more cryptocurrencies you commit.
Now, the user will not only earn interest on the crypto assets that he gives as a loan, he will also receive tokens inherent to the DeFi platform in which he is participating, as a reward for the liquidity that he is bringing to his market.
Certain analysts of the crypto asset market consider that a skilled trader can obtain up to 100% annual interest with yield farming, even using the funds obtained in one of the platforms, to invest it in others, however, others are not so optimistic and calculate that the annual return, even for a skilled trader, would not exceed 20% per year.
It is important to note that the most popular and most projected platforms currently for yield farming, almost all are being developed on Ethereum. This is because other nearby competitors, despite their great features, lack a healthy developer base (IOST) or true decentralization and therefore the main benefits of blockchain (EOS).
Because of this projects like Compound, Curve, REN, Synthetix, Balancer and even FutureSwap have been developed on Ethereum, and are offering their ecosystem farmers considerable rewards, leading them to commit their assets in each of their smart contracts.
For example, Compound is today one of the cryptocurrency lending platforms with the highest exposure, even surpassing MarketDAO, with $ 672.3 blocked on its platform, even offering its users 2,800 COMP tokens distributed daily, dividing 50% for the borrowers and the other 50% for lenders.
Everything points to the fact that this is the opportunity of the moment, for anyone who has enough skills to generate dividends with this new boom in the crypto ecosystem, which has taught us that opportunities should be taken advantage of at their best, because by becoming popular enough, annual interest rates could fall between 2% and 3%. It is also important to highlight that you must be very cautious, and consent that there are risks since an error in the protocol code, a vulnerability attacked by a malicious entity or the freezing of a loan can completely stop the performance agriculture cycle of the investor, which would generate significant losses.
