Yield Farming and Alternative ways to earn cryptoSviatoslav Piliaiev / Jul 8, 2022
A mix of strategies is often implemented to get the most out of the available yield farming options. Crypto enthusiasts search among different blockchains, exchanges, and DeFi platforms to find the highest APY. The yield isn’t always set, and it changes depending on the interest in the project. This leads to people moving their funds as soon as a better opportunity presents itself.
Lending or Borrowing capital
Farming protocols allow one to either stake funds and earn token rewards or provide interest based on lending and borrowing rates. This leads to several options of obtaining a reward. Providing trading liquidity to exchanges to earn a portion of the fees paid; Lending through smart contracts to earn a yield from interest paid; Using loans to increase capital and speculate on appreciation of either burrowed or collateral assets. Many of these yield farming strategies are associated with higher risk, but offer significant returns.
There are also methods to earn crypto that are not directly associated with yield farming. Dual invest is such, where the target price is the main factor that decides the reward. At an exact set exercise date, if the asset reached target price, the investment would return in targeted asset. If target price wasn’t reached investment would return in initial asset. A yield reward is generated in both cases, the main downside being lost opportunity if target asset has reached a price far greater than contract target.
The profitability of yield farming is clear, beyond expecting appreciation of underlying assets, people actively search to earn the highest interest reward. It is expected to see APY in double or often triple digits using discussed methods.
The downside is that yield will vary a lot from platform to platform and often changes. Moving funds is always associated with expenses and risks but is a necessary part of the process. A major threat is always the risk of losing principal investment. Yield farming often involves locking away the crypto for a period of time. During which, the threat of hacks, scams, volatility, and many other issues may arise.
An ideal scenario is for just a few DEX platforms to combine all the best APY, verified solid methods of yield farming, regulation, and security. This would reduce the difficulties of transferring funds across the crypto space, and provide stability and confidence to all participants.