Yield Farming

This is another method of earning passive income from DeFi when you have unused asset at your wallet. Yield farming is a process which allows the holders of crypto to get some reward based on their holdings. Here the crypto holders deposit a certain amount of their holding crypto into a lending protocol to earn interest from trading fees.
Anyone can stake this asset in the liquidity pool to get return for their staking support to the DeFi. Exchange fees are given from the liquidity pool to the stake holders in (APY or APR)

How does Yield Farming Work

There are two components of Yield Farming has to be discussed to know more about its process.

Liquidity providers are the holders of crypto assets who deposits the assets into the liquidity pool of the DeFi market so that that the transections can be easily done in the DeFi market. From the transection fees, the liquidity providers get the return.
Liquidity Pool is the contract and this fund is filled with the fund provided by liquidity providers. The fund from this pool is used in the P2P transections to be executed. Thus, the transection fees generate which will be the profit of liquidity providers.

Order book like Traditional exchange is not required here in case of smart contract. AMM system here creates a Liquidity Pool and works on pre-established algorithm. Who lend fund in the liquidity pool, gets the reward according to their staking contribution.

Two best Yield Farming Platforms

a. Uniswap

Uniswap is mostly popular decentralized exchange platform. It is a protocol on Ethereum mostly for the swap between ERC20 Tokens. Its not taking fee like the exchanges rather it is functioning as a public good where the users can trade token without fees and middleman. Some advantages of UNISWAP

Simple to exchange ERC-20 tokens
No need to find buyer and seller for exchange or swap
No Intermediaries
Interface is good and huge data to analyze in the application
At least five wallets can be added like Metamask
Instant swap
Allows to deposit fund from ETH wallet directly
Trading fee is just 0.3% whatever the trading volume, trade size no matter.
Complete Decentralization
Open source
APR is high for staking into Liquidity pool

How to contribute to Liquidity Pool:

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LIne Break Hive.png

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7.6 Uniswap Liquidity.png

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a. Pancakeswap

Pancakeswap is another popular swap based defi exchange (DEX) where yield is more and a number of options for swap is available. It has options to buy, sell, swap and exchange of BEP-20 (BSC) tokens. Passive income through offering liquidity is one of the main function of it and APR is so good compared with other. Now a days its popular among traders. Some reasons behind being best on my eyes-