Where Do I Plant My Crypto Yield Farm?
As yield farming mainstreams, we simplify the concept of liquidity mining, and review some old and new options for yield farming platforms.
From Staking to Yield Farming
After mastering staking, you may have considered planting that crypto in a yield farm. What exactly is yield farming? Farming is not just some magical money-making term; you actually “farm” for yields.
What are Liquidity Pools and Liquidity Providers?
Let’s define a few terms, starting with decentralized finance (DeFi). Through smart contracts and code, DeFi allows peer-to-peer (P2P) borrowing, lending, and money transfers without the need for a centralized bank. A decentralized exchange (DEX), like Uniswap or WanSwap, allows users to swap tokens for others without needing an intermediary. When a coin or token needs to be converted into a different coin or even fiat, liquidity is needed and accessed by the user.
If you want to be your own bank as well as earn a return on your money as you would in a bank, DeFi empowers the process. Providing liquidity is straight forward, you simply need to supply crypto assets to a liquidity pool pair. You are now a farmer and liquidity provider and earn passive income on the deposits. Rather than a bank lending out your hard-earned savings, providing the depositor with .5% interest and the borrower with a 15% loan, the liquidity provider or farmer, erases the middleman and reaps the rewards.
How Does Yield Farming Work?
Now with that reaping, we bring the analogy back to yield farming. When you decide to provide liquidity, you put assets into a decentralized application (dApp). Not only does the provided liquidity earn APR on the fees collected by that pool, but it can also earn rewards in the native token.
Is Yield farming Risky?
Users should not dive into farming without fully understanding all the details and intricacies of farming on each platform. Several highly intelligent YouTubers and writers have created excellent content explaining farming and the recommended first step is to DYOR. Transferring assets in and out incurs its own transaction fees so users, especially those on Ethereum, should note the fees and check for profitability. A deposit under 1,000 USD might not net a profit on Ethereum. There is also the risk of impermanent loss, which is the loss created by providing liquidity for an asset that rapidly appreciates or depreciates.
Where are The Yield Farming Opportunities?
Uniswap supplies a host of liquidity pools. For example, if a user provided liquidity to a Cardstarter (CARDS)/Ethereum (ETH) Pool, the user would deposit a 50/50 amount of CARDS and ETH into the associated liquidity pool (LP). The depositor receives an LP token in return and now earns a percentage of the transaction fees earned from that pool. LP tokens can even be staked on other platforms to harvest a second round of rewards. Sewing seeds and harvesting occurs in a variety of combinations. Users just need to find the right piece of land.
AAVE and PancakeSwap for Yield Farming
Many farmers are familiar with AAVE, one of the most popular staking and farming platforms. AAVE provides a multitude of opportunities including integration with Polygon, a layer 2 scaling solution that brings trading fees close to zero.
PancakeSwap is a DEX on the Binance Chain with a selection of several liquidity pairs. The fees to enter and exit are considerably lower with Binance and AAVE than those incurred on Ethereum.
Yield Farming Combined with NFTs: Dual Farming
Zookeeper (ZOO), a WanChain (WAN) dApp, opened low fee yield Farming opportunities mid-April. This is not the typical drab investing platform, but rather a colorful arena of pools with zoo animal mascots with an APR of over 100% in some pools. Zookeeper provides the first and only known Dual Farming option in their ‘zoo’ area. Dual farming combines all the benefits of yield farming with the hot non fungible token (NFT) market.
NFTs and Yield Farming, How?
NFTs are not just art, but rather represent the uniqueness and verifiability of an asset. In ZooKeeper, there are tons of NFTs available in ‘the market.’ These NFTs can be purchased, earned, or traded. Not just funky pixelized pictures, each Zookeeper NFT has a set of features embedded that offer tools to upgrade your farming experience and hence rewards. NFTs boost the APR of farmed tokens and can reduce the lock period needed in order to gain an additional APR boost. The market contains unique NFTs like ‘Leaf Powder of Yore’ for example. This NFT provides an APR boost of 77% and a lock period reduction of 16%. Add this NFT to a farming pool in the Zoo and unlock APRs of up to 180% as of the date of this publication.
Staking and NFT Marketplace on Zookeeper
Zookeeper also provides nontraditional staking as well. In ‘The Expedition’ section, treasure chests come into play. Users can buy silver or gold chests to unlock NFT boosters. Users can also stake ZOO to earn chests containing NFT rewards. These NFTs can subsequently be sold in the market or attached to a farm pool for a boost.
If users prefer the more traditional staking method, ‘The Safari’ section offers two staking pools. In the first ongoing pool, users can stake ZOO to earn ZOO.
The second pool offers the option to stake ZOO to earn the current community voted token. In this pool, which changes monthly, the community votes for the token they will receive as a reward. The weight of each vote is determined by the amount of ZOO the user holds.
Liquidity Pools on Zookeeper
In Addition to WAN and ZOO, WanChain supports a variety of assets and offers a portability feature to bridge several assets including, DOGE, XRP, and soon Litecoin (LTC) among others. As a WanChain dApp, Zookeeper currently supports liquidity deposit pairs of ZOO, WAN, BTC, ETH, XRP, USDT, and USDC. Zookeeper also contains governance features in which users can vote for the next pool added, making your favorite token potentially next on the crop rotation.
Yield Farming Wrap Up
A venture into farming is no small potato. The possibility of failure is always present but the potential for growth exists in mounds. New options even add a little fun and profitable creativity for new and old farmers alike. The only question left is where will you plant your crypto?
Disclosure: This article was sponsored by Zookeeper.finance
