• Home
  • Podcast
  • App
No Result
View All Result
Subscribe
×
sign in
  • Learn
    • All
    • Crypto Basics
    • Token Metrics Tutorials
    • Weekly Index Performance
    Bitcoin: Everything You Need To Know

    Bitcoin: Everything You Need To Know

    What is Web 3.0? Everything You Need to Know

    What is Web 3.0? Everything You Need to Know

    NEW Token Metrics Crypto Market Indicators

    NEW Token Metrics Crypto Market Indicators

    Weekly Index Performance – May 26, 2022

    Weekly Index Performance – May 26, 2022

    NFTs Explained: What Are Non-Fungible Tokens?

    NFTs Explained: What Are Non-Fungible Tokens?

    Weekly Index Performance – April 27, 2022

    Weekly Index Performance – April 27, 2022

    When Does the Crypto Market Close?

    When Does the Crypto Market Close?

    Will Shiba Inu reach $1?

    Will Shiba Inu reach $1?

    How to Receive Crypto Alerts Through Token Metrics

    How to Receive Crypto Alerts Through Token Metrics

    • Crypto Basics
    • Weekly Performance
  • Market Analysis
    • All
    • Market Navigator
    • Market Update
    shanghai hard fork

    Shanghai Hard Fork – Investing Opportunities | Navigator

    The Bottom | Market Update

    The Bottom | Market Update

    The Metaverse Rally | Market Update

    The Metaverse Rally | Market Update

    The Dollar and DOGE| Market Update

    The Dollar and DOGE| Market Update

    Crypto Market Update

    Can Crypto Rally In October? | Market Update

    Crypto Rektember

    Can You Believe The Macro Shift ? Market Update

    Crypto Rektember

    From Rektember to a Brighter October | Market Update

    ethereum-its-time

    Ethereum: It’s Time | Market Update

    Europe is headed for a depression

    Europe is headed for a depression | Market Update

    • Market Update
    • Price Prediction
    • Market Navigator
  • Deep Dive
  • Hidden Gems
    • All
    • DeFi
    • Gaming and Metaverse
    • NFTs
    • Web 3
    Azuki NFTs

    Azuki | Hidden Gems – NFT

    LonelyPop

    LonelyPop, POTATOZ By 9GAG | Hidden Gems – NFT

    Moonrunners, Disco Kittiez | Hidden Gems – NFT

    Moonrunners, Disco Kittiez | Hidden Gems – NFT

    Evmos, Penumbra, Oasis Network | Hidden Gems – Web 3

    Evmos, Penumbra, Oasis Network | Hidden Gems – Web 3

    League Of Kingdoms, Aurory | Hidden Gems – Gaming and Metaverse

    League Of Kingdoms, Aurory | Hidden Gems – Gaming and Metaverse

    Orderly Network, zCloak Network | Hidden Gems – Web 3

    Orderly Network, zCloak Network | Hidden Gems – Web 3

    Sneakerheads, The Possessed NFT | Hidden Gems – NFT

    Sneakerheads, The Possessed NFT | Hidden Gems – NFT

    BitCraft Online, Earth from Another Sun | Hidden Gems – Gaming and Metaverse

    BitCraft Online, Earth from Another Sun | Hidden Gems – Gaming and Metaverse

    OnChainMonkey & RUNNER | Hidden Gems – NFTs

    OnChainMonkey & RUNNER | Hidden Gems – NFTs

    • DeFi
    • Gaming and Metaverse
    • NFTs
  • Code Reviews
  • Reports
    • All
    • Altcoin Quarterly
    • Awards and Ratings
    • News and Thought Leadership
    NFT Grade

    Introducing Token Metrics NFT Grade

    Token Metrics Research

    Introducing Token Metrics Research

    Research & Chill: 30% Token Metrics Discount

    Research & Chill: 30% Token Metrics Discount

    The Best Crypto News Sites of 2022

    The Best Crypto News Sites of 2022

    The Best Crypto Analysts of 2022

    The Best Crypto Analysts of 2022

    Token Metrics + CEX.IO Promotional Coupon

    Token Metrics + CEX.IO Promotional Coupon

    Partner plan

    NEW Token Metrics Partner Plan

    NEW Token Metrics Crypto Market Indicators

    NEW Token Metrics Crypto Market Indicators

    Best Altcoins of 2021 | Altcoin Quarterly Report | Q4 2021

    Best Altcoins of 2021 | Altcoin Quarterly Report | Q4 2021

    • Altcoin Quaterly
    • Moon Awards
    • News and Thought Leadership
  • TV
  • Learn
    • All
    • Crypto Basics
    • Token Metrics Tutorials
    • Weekly Index Performance
    Bitcoin: Everything You Need To Know

    Bitcoin: Everything You Need To Know

    What is Web 3.0? Everything You Need to Know

    What is Web 3.0? Everything You Need to Know

    NEW Token Metrics Crypto Market Indicators

    NEW Token Metrics Crypto Market Indicators

    Weekly Index Performance – May 26, 2022

    Weekly Index Performance – May 26, 2022

    NFTs Explained: What Are Non-Fungible Tokens?

    NFTs Explained: What Are Non-Fungible Tokens?

    Weekly Index Performance – April 27, 2022

    Weekly Index Performance – April 27, 2022

    When Does the Crypto Market Close?

    When Does the Crypto Market Close?

    Will Shiba Inu reach $1?

    Will Shiba Inu reach $1?

    How to Receive Crypto Alerts Through Token Metrics

    How to Receive Crypto Alerts Through Token Metrics

    • Crypto Basics
    • Weekly Performance
  • Market Analysis
    • All
    • Market Navigator
    • Market Update
    shanghai hard fork

    Shanghai Hard Fork – Investing Opportunities | Navigator

    The Bottom | Market Update

    The Bottom | Market Update

    The Metaverse Rally | Market Update

    The Metaverse Rally | Market Update

    The Dollar and DOGE| Market Update

    The Dollar and DOGE| Market Update

    Crypto Market Update

    Can Crypto Rally In October? | Market Update

    Crypto Rektember

    Can You Believe The Macro Shift ? Market Update

    Crypto Rektember

    From Rektember to a Brighter October | Market Update

    ethereum-its-time

    Ethereum: It’s Time | Market Update

    Europe is headed for a depression

    Europe is headed for a depression | Market Update

    • Market Update
    • Price Prediction
    • Market Navigator
  • Deep Dive
  • Hidden Gems
    • All
    • DeFi
    • Gaming and Metaverse
    • NFTs
    • Web 3
    Azuki NFTs

    Azuki | Hidden Gems – NFT

    LonelyPop

    LonelyPop, POTATOZ By 9GAG | Hidden Gems – NFT

    Moonrunners, Disco Kittiez | Hidden Gems – NFT

    Moonrunners, Disco Kittiez | Hidden Gems – NFT

    Evmos, Penumbra, Oasis Network | Hidden Gems – Web 3

    Evmos, Penumbra, Oasis Network | Hidden Gems – Web 3

    League Of Kingdoms, Aurory | Hidden Gems – Gaming and Metaverse

    League Of Kingdoms, Aurory | Hidden Gems – Gaming and Metaverse

    Orderly Network, zCloak Network | Hidden Gems – Web 3

    Orderly Network, zCloak Network | Hidden Gems – Web 3

    Sneakerheads, The Possessed NFT | Hidden Gems – NFT

    Sneakerheads, The Possessed NFT | Hidden Gems – NFT

    BitCraft Online, Earth from Another Sun | Hidden Gems – Gaming and Metaverse

    BitCraft Online, Earth from Another Sun | Hidden Gems – Gaming and Metaverse

    OnChainMonkey & RUNNER | Hidden Gems – NFTs

    OnChainMonkey & RUNNER | Hidden Gems – NFTs

    • DeFi
    • Gaming and Metaverse
    • NFTs
  • Code Reviews
  • Reports
    • All
    • Altcoin Quarterly
    • Awards and Ratings
    • News and Thought Leadership
    NFT Grade

    Introducing Token Metrics NFT Grade

    Token Metrics Research

    Introducing Token Metrics Research

    Research & Chill: 30% Token Metrics Discount

    Research & Chill: 30% Token Metrics Discount

    The Best Crypto News Sites of 2022

    The Best Crypto News Sites of 2022

    The Best Crypto Analysts of 2022

    The Best Crypto Analysts of 2022

    Token Metrics + CEX.IO Promotional Coupon

    Token Metrics + CEX.IO Promotional Coupon

    Partner plan

    NEW Token Metrics Partner Plan

    NEW Token Metrics Crypto Market Indicators

    NEW Token Metrics Crypto Market Indicators

    Best Altcoins of 2021 | Altcoin Quarterly Report | Q4 2021

    Best Altcoins of 2021 | Altcoin Quarterly Report | Q4 2021

    • Altcoin Quaterly
    • Moon Awards
    • News and Thought Leadership
  • TV
No Result
View All Result
No Result
View All Result
Home Learn Crypto Basics

What is Yield Farming? The Definitive Guide

by Charles Allred
2022/04/14
in Crypto Basics, Learn
Reading Time: 4 mins read
0
0
SHARES
31
VIEWS

In DeFi, we hear the term “yield farming” all the time, but what is yield farming exactly? The answer is both straightforward and complex. Yield farming is the process of putting your crypto in places where it can earn you more crypto passively. Yield farming can include but is not limited to staking, providing liquidity to an AMM, and lending tokens. In this post, we’ll cover three types of yield farming and the risks associated with them: providing liquidity to an AMM, borrowing and lending, and leveraged lending.

Types of Yield Farming:

Following are some of the types of yield farming you can start with right away:

Liquidity Providing to an AMM:

Crypto users can contribute their tokens to automated market makers (AMMs) like Uniswap and Sushiswap and earn a portion of their trading fees in exchange for contributing liquidity. The Uniswap market-making fee is 0.3% for most trading pairs.

If you provide $500 in ETH and $500 in DAI for a total of $1,000 in the ETH/DAI pool on Uniswap, and that amount accounts for 1% of the total pool on a day when the pair does $1 million in volume you would earn $30 in fees in just 24 hours.

The primary risk with providing liquidity to an AMM is a bug in the protocol’s smart contract. Users can purchase insurance through Nexus Mutual to cover smart contract risk. Other risks include impermanent loss and rug pull schemes. Rug pulls are a risk across crypto, but the risk of impermanent loss is exclusive to DeFi.  

Impermanent loss occurs when the price of an asset, say ETH, provided to a liquidity pool increases in value to the point that you lose some of the tokens you provided. For example, you put one ETH and the equivalent value of DAI into a liquidity pool, and the price of ETH doubles, when you remove your tokens, you will take out less than one ETH. In some cases, it would have been more profitable to hold your ETH and DAI instead of contributing to the liquidity pool.

Borrowing and Lending:

Like earning interest in a bank account, providing liquidity to a lending protocol such as AAVE or Compound can produce yield. Most banks offer 1% yearly interest in savings accounts. On Compound, you can provide liquidity for nearly 8% interest. Adding to the supply side of lending protocols is the lending portion of lending and borrowing.

Borrowing involves taking out a loan for a token you believe will appreciate. You put $15,000 in ETH into a pool and receive $10,000 in DAI back (all loans in DeFi are overcollateralized, meaning you put up more in collateral than you receive from the loan). You now have $10,000 in DAI available to you and $15,000 in Ethereum sitting in a vault.

You will need to pay back the loan with interest eventually. Once your loan is paid back, you will be able to withdraw your Ethereum, which hopefully will have increased in value. Risks associated with lending and borrowing include impermanent loss, smart contract risk, and rug pulls.

Leveraged Lending:

Leveraged lending is the most complex strategy we’ll go over today. The process involves lending an asset, LINK for example, into a protocol like AAVE and borrowing stablecoins to purchase more LINK and lend those tokens. The process then repeats itself, lend LINK as collateral, borrow stables to purchase LINK, deposit LINK, and repeat.  

After this process, you now have significantly more LINK earning interest in the lending protocol. Leveraged lending is the riskiest strategy mentioned in this post. Aside from the risks listed above, which also apply to leveraged lending, lenders can get liquidated if the price of LINK falls.

Tags: Crypto BasicsFree
Charles Allred

Charles Allred

Chase started working as an intern in the crypto space in 2020. He quickly found his passion in the space and was promptly promoted to a full-time role. Today, Chase's interests lie in the NFT and DeFi realms. Chase serves as the co-host of our weekly NFT Hidden Gems YouTube show.

Related Posts

Help

Market Landing Page Tutorial

January 6, 2023
NFT Grade
News and Thought Leadership

Introducing Token Metrics NFT Grade

August 18, 2022
Token Metrics Research
News and Thought Leadership

Introducing Token Metrics Research

July 9, 2022
Next Post
World of Women, Azuki, Fancy Bears, SIDUS: NFT Heroes | NFT Hidden Gems

World of Women, Azuki, Fancy Bears, SIDUS: NFT Heroes | NFT Hidden Gems

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

COMPANY

  • About Us
  • Contact Us
  • Privacy Policy
  • Sitemap

7600 Chevy Chase Drive, Suite 300, Austin, Texas, 78752, USA
Email: info@tokenmetrics.com | Tel: +1-888-908-6536

DISCLAIMER

Token Metrics Media LLC is a regular publication of information, analysis, and commentary focused especially on blockchain technology and business, cryptocurrency, blockchain-based tokens, market trends, and trading strategies.

Token Metrics Media LLC does not provide individually tailored investment advice and does not take a subscriber’s or anyone’s personal circumstances into consideration when discussing investments; nor is Token Metrics Advisers LLC registered as an investment adviser or broker-dealer in any jurisdiction.

Information contained herein is not an offer or solicitation to buy, hold, or sell any security. The Token Metrics team has advised and invested in many blockchain companies. A complete list of their advisory roles and current holdings can be viewed here: https://tokenmetrics.com/disclosures/

Token Metrics Media LLC relies on information from various sources believed to be reliable, including clients and third parties, but cannot guarantee the accuracy and completeness of that information. Additionally, Token Metrics Media LLC does not provide tax advice, and investors are encouraged to consult with their personal tax advisors.

All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Ratings and price predictions are provided for informational and illustrative purposes, and may not reflect actual future performance.

Copyright © 2022 - Token Metrics - All Rights Reserved

No Result
View All Result
  • Learn
    • Crypto Basics
    • Weekly Performance
  • Market Analysis
    • Market Update
    • Price Prediction
    • Market Navigator
  • Deep Dive
  • Hidden Gems
    • DeFi
    • Gaming and Metaverse
    • NFTs
  • Code Reviews
  • Reports
    • Altcoin Quaterly
    • Moon Awards
    • News and Thought Leadership
  • TV

Copyright © 2022 Token Metrics All Rights Reserved