DeFi yield farming, to put it another way, is an investment strategy. Let's pretend you have $1,000 in cryptocurrency on you. You can pledge your crypto asset and earn interest on the amount pledged by using a yield farming platform. The fact that the crypto you pledge will be used to provide asset liquidity to platform traders is even more intriguing. In the process, you can make a lot of money. Of course, it's possible that you'll return home empty-handed. DeFi yield farming, on the other hand, may be able to offer interest rates as high as 100% or even higher than what banks currently offer on deposits. It is a high-risk, high-reward investment strategy, as previously stated.
The Reason for Yield Farming's Increase
The arrival of the COMP token – the Compound Finance ecosystem's governance token – is to blame for the unexpected surge in interest in yield farming. Holders of governance tokens gain governance privileges, allowing them to participate in the DeFi protocol's governance. A common way to start a decentralised blockchain is to distribute these governance tokens algorithmically with liquidity bonuses. By providing liquidity to the protocol, liquidity providers are enticed to 'farm' the new token.
The popularity of this type of token delivery model was boosted by the COMP. DeFi ventures, on the other hand, have come up with novel ways to bring liquidity into their environments.
Farming yields come in a variety of shapes and sizes.
Compound, MakerDAO, and Aave are three of the most well-known yield farming platforms.Let's take a look at the services they provide.
Compound is a platform for algorithmic loans and lending. Anyone with an Ethereum wallet can start earning money right away by lending it to Compound's liquidity pool. Rates are calculated using an algorithm based on the supply/demand ratio.
MakerDAO is a decentralised lending platform that accepts ETH, BAT, USDC, and WBTC as payment for DAI tokens. DAI is a stable coin with a one-to-one exchange rate with the US dollar. DAI is frequently used by yield farmers to implement their investment strategies.
Aave is a widely used decentralised loan and credit protocol among yield farmers. In exchange for their funds, the lending party (liquidity providers) receives Tokens. When these tokens are issued, they immediately begin to generate revenue.
Decentralised finance, specifically yield farming protocols, are a technological and financial breakthrough in finance, cryptocurrency economics, and computer science.
Conclusion-
The DeFi industry has recently received a lot of attention. The community became obsessed with DeFi yield farming after Compound gave away COMP management tokens and some of their holders claimed annual returns of 100%. That is why it is more important than ever to think about your yield farming development. Suffescom is a leading DeFi Yield Farming Development Company, with a number of yield farming protocols that run on Defi platforms, making a significant impact on the ecosystem. Suffescom can help you create a commercially viable Defi yield farming platform.
