Crypto 101: What Is Yield Farming In Decentralized Finance? (Part 3)

In this section, we will learn about today’s popular yield farming platforms and protocols. If you haven’t read the previous article, you can find out here.

Yield farming platforms and protocols

MakerDAO

MakerDAO is a decentralized credit platform that allows users to create DAI, a stablecoin that is algorithmically tied to the value of USD. Anyone may establish a Maker Vault and store collateral assets like ETH, BAT, USDC, or WBTC. They can produce DAI as a debt against the secured collateral. The stability charge, which is decided by MKR token holders, accrues interest on this debt over time.

MakerDAO can be used by yield farmers to mint DAI for use in yield farming tactics.

Lido Finance

Lido Finance is a dApp that allows for liquid staking. Lido presently has about $6 billion in total value locked (TVL) on the platform, with over 199,000 stakeholders protecting the protocol. Some of the industry’s top blockchain security organizations, like Quantstamp and Mixbytes, have audited Lido.

Lido presently supports five cryptocurrencies: ETH, MATIC, SOL, KSM, and DOT. Lido is striving to incorporate more assets and chains onto the platform, including AVAX, NEAR, and many more in the future.

Aave

With over $3.7 billion in value locked up, Aave is one of the most extensively utilized stablecoin yield farming platforms.

AAVE is also Aave’s native token. This token encourages users to use the network by offering incentives like fee reductions and voting power in governance.

When it comes to yield farming, it is usual to see liquidity pools collaborate. The Gemini dollar is the most valuable stablecoin available on Aave.

Curve Finance

Curve used to be the most valuable DeFi platform in terms of total value locked. The Curve Finance platform uses locked funds more than any other DeFi platform, thanks to its proprietary market-making algorithm – a win-win strategy for both swappers and liquidity providers.

Curve offers a comprehensive list of stablecoin pools with attractive APRs that are linked to fiat currency. Stablecoin pools are fairly safe as long as the tokens do not lose their peg. Impermanent loss may be completely avoided since their expenses do not change in comparison to each other. Curve, like all DEXs, risks momentary loss and smart contract failure.

Curve has its own token, CRV, which is used to manage the Curve DAO.

Uniswap

Uniswap is a DEX system that allows for trustless token trades. To build a market, liquidity providers invest the equivalent of two tokens. The liquidity pool is then traded against traders. Liquidity providers get fees from trades that occur in their pool in exchange for providing liquidity.

Uniswap has become one of the most popular platforms for trustless token exchanges due to its frictionless nature. This is beneficial in high-yielding agricultural systems. UNI, Uniswap’s DAO governance token, is also available.

Conclusion

Yield farming is an intriguing option for cryptocurrency fans to earn a return on their investment that is not only based on the currency’s value increasing. However, due to the dangers involved, yield farming may not be viable for many investors, particularly rookie investors.

The prospect of earning 100%, 200%, or more in yearly interest is appealing. You should not engage, however, until you completely grasp how yield farming works and the hazards associated. Conduct your due homework on the exchanges, currencies, and teams behind the yield farming activity you intend to embark on. All of these things are required to reduce the risks connected with this investment.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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