It has been the hottest trend in the DeFi ecosystem. And it’s safe to say that Yield Farming is one of the main factors why DeFi is so popular until now. You already had a glimpse about Yield Farming in the previous blogs, but there’s more to it. Let’s find out more in this blog.
What is Yield Farming?
Basically, Yield Farming or Liquidity Mining is a way to get more crypto using the crypto you have. It works pretty much similar to a deposit in a bank. Where we can get interest from your savings. The primary difference is that in Yield Farming, it uses special programming called a smart contract.
With Yield Farming you can earn rewards just by owning a certain amount of crypto using a liquidity protocol without requiring special permission. This allows anyone to earn passive income from crypto using a decentralized financial ecosystem built on top of the Ethereum blockchain network.
Why is Yield Farming a Trend?
As a concept that offers crypto users and hodlers a new way to earn interest from their crypto, Yield farming also allows crypto hodlers to remain hodl and at the same time “employ” their cryptos to gain more rewards.
It may look simple and easy. But the process behind it is contrary. There are a lot of things to consider before you decide to become a Yield Farmer. If you want to get the most out of Yield Farming, you should at least know and understand the basics of how the crypto works and have a little technical expertise. With that being said, you need to develop a strategy so that the crypto capital that is used grows optimally as expected and not the other way around.
So, How Does Yield Farming Work?
At first glance, Yield Farming works looks like staking. But wait, there is a lot more complexity and difference behind it. Yield farming works with users called Liquidity Providers (LP) whose role is to add funds to the liquidity pool.
So, what is the liquidity pool? a simple understanding its a smart contract that contains funds. In return for providing funds in the liquidity pool, the liquidity providers will get a reward, this reward may be generated from fees generated by the DeFi platform used or it could be from other sources.
Where some liquidity pools pay their rewards in different tokens/coins. Then the prizes are deposited in other liquidity pools to get more prizes at that place, and so on. And it happened in short order.
It’s quite complex. And as said before, you need to have a strategy and courage to become a reliable yield farmer so that your crypto assets can develop optimally.
Apart from the attractive profits you can get from yield farming activities, this method is actually not recommended for beginner crypto users. The complexity and fast processing within the protocol itself require you to have a specific strategy for gain maximum yield. In addition, the capital required is not small, based on some of our sources you need to prepare at least no less than US$ 2,000 to get you started in Yield Farming.
Fear not! For those who are still beginners in the crypto world and don’t have that much capital but want to still get passive income from your crypto, NOBI is here to help!
NOBI has launched the newest feature, NOBI Savings after previously NOBI helped users develop their crypto assets through NOBI Strategy. We are delighted with the good response we received from our users regarding NOBI Strategy.
NOBI Savings has been supported by two trusted protocols in the DeFi ecosystem that have been audited, AAVE & Compound Finance. With just US$ 50, you can join the DeFi ecosystem without having to worry about all the complexities and strategizing, because NOBI has done it for you.
More about DeFi and all the trend that is going on in the crypto world in our upcoming blogs!