How Many Dollars Has Yield Farming Contributed to The Crypto Ecosystem?
It is almost likely that when you hear the phrase “yield farming”, the latest crop of corn, beans, and peanuts comes to your mind.
Yield farming is a thriving new trend in the world of cryptocurrencies, which stemmed from an already blazing hot trend of decentralized finance applications.
Cryptocurrencies holders can now have their holdings locked up thanks to yield farming. In return, they get additional cryptocurrency as rewards. This way, investors are able to earn either fixed or variable profits when they invest in a DeFi market.
Yield farming has been seen by many investors as a way to increase their profits. It has successfully created more than $29 billion as at the latest update by CoinMarketCap yield farming data.
By discussing the concept of decentralized finance, yield farming, beneficiaries of yield farming, and various yield farming platforms and protocols, this article will reveal the value added to the crypto market through yield farming.
The Concept of Decentralized Finance.
Decentralized Finance (also called DeFi) is a general term for various financial applications in blockchain or cryptocurrency, which aims to disrupt financial intermediaries.
This technology allows the several parties involved to possess individual copies of transaction history, meaning it is not controlled by a single central source (hence the word “decentralized”).
DeFi is an improvement over traditional financial systems in that centralized systems can limit the speed and sophistication of financial transactions while offering the entities involved less direct control over their money.
DeFi applications are unique because they can be easily accessible by anyone with an internet connection and a smart wallet and eliminate the need for custodians or middlemen.
The most popular types of DeFi applications include Decentralized exchanges, Lending platforms, Liquidity mining, prediction markets and Yield Farming.
Who benefits from Yield Farming?
It is clear the first set of people who will benefit from yield farming, the investor. An investor lends their money to the platform, and they receive tokens for their investment.
At the end of the period, they are repaid their principal investment, plus some extra interest. This is the classic lender’s benefit, with the addition of some extra token. The extra tokens are the major distinction between traditional lending and yield farming via DeFi platforms.
Suppose there is a considerable increase in the value of the token provided as a dividend. In that case, the DeFi lender-investor may experience returns on investment (ROI) greater than what would otherwise be obtained in the traditional non-crypto markets.
In cases where the token used as a dividend accumulates value quickly enough, it might be possible to make money farming yields as a borrower.
For instance, someone borrows cryptocurrency and is subsequently rewarded with tokens for engaging in the lending platform.
As long as the value of the token increases at a rate greater than the borrowing cost, you might ultimately earn a profitable yield despite paying interest on their loan.
There is a caveat though there is risk in borrowing, and one should be very confident in the rate of token appreciation before making money by borrowing crypto.
The last entity that might also benefit from yield farming is the governors of a specific token or platform. Governors in this context might refer to a centralized collective or participant-investors in a decentralized platform.
Generally, the interaction incentivized by yield farming is positive for the stakeholders. When many investors utilize a platform offering substantial yields, the platform, and any connected token become valuable due to greater popularity.
Hence, the token accumulates value, the yields provided by participating in the linked platforms become very attractive, and more farmers engage in reaping those yields.
50B USD total value locked at TOP 5 Defi Projects
The number of yield farming platforms and decentralized protocols grows daily with the total value locked at the top 5 DEFI projects reaching 50B USD lately according to Defi Pulse.
Don-Key Finance to boost yield farming exposure
With Don-Key finance, investors are able to join expert yield farmers for better profits.
Inspired by the “copy trading” format popularized by exchanges, whereby new traders can mimic the moves made by pros.
Don-key will bring a similar strategy for yield farming.
This will empower users to earn the rewards from having top traders work for them.