Making sense of Defi concepts - Yield farming

This is a continuation to my previous Defi concepts post.


Instead of reading a lengthy write up by me on what is Yield Farming, I think the video by Finematics below would give a much clearer picture. Finematics (Youtube channel) has created many brilliant introductory and explanatory videos on various aspect of cryptocurrency and I would recommend a follow.




My notes

Liquidity mining - the process of distribution of tokens to users of the protocol. It's additional incentive for yield farmers (these tokens can be staked for additional reward).

Leverage - Farmers can deposit their coins as collateral to one of the lending protocols to borrow other coins, they can repeat this procedures.

Risks - liquidation risk (from leveraging), smart contract risk, defi specific risks.

Crop rotation can help farmers keep up with changes in yields.


You can check out this article for brief descriptions of some popular yield farming protocols.


Yield farming need not only be from liquidity providing, it can also be from lending and staking. There are plenty of resources out there for you to find out more by googling each of the terms above.


My thoughts


People input, people borrow, borrowers input again to chase high yields... And this shall go on until a bubble burst. I guess.


Take care of your hot wallet while having fun and swapping crypto around. Don't become a hack or phish victim.


Advice to starters:


1) Learn to differentiate between Cefi and Defi

2) Read the reviews and find out which (platforms) suit you better

3) Follow Twitter and Discord to find out what's hot and what's not, and the generally sentiments (not asking you monkey see money do hor, DYDD)

4) Read about cases of rekt and how to avoid them

5) Don't buy tokens on FOMO, do homework (read whitepaper, assess project viability, liquidity for entering / exiting etc)


Remember, positive reviews stay positive until they don't. Good yields remain good until they don't. 

We all know that some good things do come to an end some day. Everything seems to shine when the sun's shining. Understanding the crypto cycle and capital flow is important.


This article by The Babylonians is one good read - Beginner's Guide to Crypto.


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Thanks for reading!

Disclaimer: Contents of this blog are personal opinions and NOT financial advice to buy or sell any mentioned securities, commodities or assets.

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Disclaimer:

The contents of this blog are author's personal opinions and do not constitute advice to hold, buy or sell any securities, commodities or assets mentioned. I do not guarantee the accuracy and reliability of any information provided, and shall not be liable for any losses incurred from reading my posts or using the materials herein. This blog may contain affiliate links to external sites.