Yield farming allows you to earn rewards by providing liquidity to the blockchain network. It is typically done using ERC-20 tokens on Ethereum, and the rewards are usually also a type of ERC-20 token. In the recent past, yield farming has become a popular DeFi solution on the Ethereum blockchain. Investors earn interest through staking tokens in liquidity pools over a certain period. This guide will take you through key info that will help you to get started.
What Do You Need To Start Farming?
Well, you don’t need much to start yield farming. All you need is an Ethereum wallet loaded with some ETH for transaction payments. You probably have a yield farming opportunity in mind. The next step is getting to liquidity pools. In case you don’t know of any yield farm, the next segment will help you identify a yield farming opportunity.
Find Yield Farming Opportunities
Several cryptocurrency yield farming opportunities where you can earn a fortune with your crypto assets. But it is important to be aware of the risks and scams that come with farming. The risk is too high, and investors should not get excited and blindly jump into any farming opportunity out there without doing proper research. All said, here are some places to get farming opportunities:
Etherscan, through its Yield Farm page, gives users an extensive list of projects with lucrative token yield farming campaigns.
Coingecko – the market data giant also has a Farm page that provides tools like APY and impermanent calculators and other great tools to help you in your investment process. Through this section, the site presents you with an opportunity to access the full farming protocols.
The YieldFarming site is another great place with many farming opportunities. Here you will access detailed wallet statistics that will enable a smooth investment journey.
Once you identify a farming protocol, it is important to keep in mind the APY and gas prices. Relax, information on the APY is available on most of the farming protocols. The higher the annual percentage yield, the higher the risk. Yield changes with time, as farming campaigns have unique phrases of distribution. Kindly note the distribution setup changes on your farming site to understand how it works. Because of the current activities in the DeFi spaces, the gas fee is very high but the figures crossed. But with the launch of ETH 2.0 will hopefully come to the rescue of traders and investors.
Getting Into Liquidity Pools
This is the most important part of yield farming cryptocurrency once you have your funds and yielding opportunity set. You will have to deposit your tokens to get into a liquidity pool. Depositing into these pools allows investors to earn a cut of the pool’s transaction fees through the LP tokens. You will get LP tokens once you deposit your funds. Bobby Ong, the chief operating officer and a co-founder of CoinGecko, a cryptocurrency tracking platform
“Liquidity providers are rewarded in the form of the DeFi protocol’s native tokens. To receive the actual yield in USDT, the liquidity provider will need to sell the native token to USDT. It will drive down the native token price and yield further.”
DeFi protocols facilitate the adding of your tokens at a single click of a button. Platforms like Zerion let you add your crypto liquidity pools at any time. To this point, you are probably wondering if farming has started. Not yet.
For the farming process to start, you need to stake your tokens to start earning. Upon getting your LP tokens, you will need to head over to the dashboard and press the stake button. Once you have staked your tokens, all is set. You will start earning your tokens automatically throughout the farming campaign.
So which coins can I farm?
In case you are asking this question, here are some tokens that you can farm:
Uniswap
Wrapped BTC
Yearn Finance, among others.
