How to start yield farming
To start yield farming, you need to sign up for an account on a Defi platform. You also need to hold some amount of crypto. Usually Ethereum or ERC-20 tokens, in crypto wallets. For example, the MetaMask wallet is a popular wallet for storing ERC-20.
You will then select the type of assets you want to lend and enter the amount you lend. The platform will display all fees as well as expected earnings. Once you’ve contributed crypto assets, it’s time to see it automatically earn you more.
The interest rate will be paid at the minimum rate. This threshold differs across Defi platforms as different crypto asset classes. Borrowers can also choose the amount and duration of the loan. Besides, keep in mind that real interest rates are not very high. In order to have a significant income from crypto farming, you will need to deposit a significant amount of crypto.
How it works
Yield Farming is mainly done using ERC20 tokens on Ethereum and the rewards are the same. There are several protocols available in the DeFi ecosystem that allow users globally to lock up their crypto and monetize it. Farmers will continuously transfer their own funds according to different protocols to earn high profits for themselves.
Yield farmers can be borrowers, lenders or exchange tokens with each other through the Liquidity pool.
Liquidity pool explanation:
Are smart contracts that contain money in them. These liquidity pools allow users to borrow, lend or exchange tokens.
Between smart contracts there are fees for each transaction. These fees are considered revenue for liquidity providers (LPs). In addition, there is Liquidity mining, which means that in addition to fee revenue, LPs also receive additional tokens for their revenue.
Farmers have found opportunities for profitable lending in DeFi, one of which can generate 100% profit. Yes, exactly 100% of that profit, a number that is hard to come by with the traditional banking system.
That is why Yield Farming has become a hot topic in the crypto world in general and DeFi in particular. DeFi has opened up so many opportunities for all of us to join to make money.
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