DeFi Yield farming is a way of trying to maximize a rate of return on capital by leveraging different DeFi protocols. Yield farming is a fresh way for users to earn passive income in the DeFi ecosystem, basically by making more cryptocurrency with their existing holdings. Instead of just holding, a person can generate profits in exchange for participation in DeFi protocols.
Top 10 DeFi Protocols for Yield Farming
- Uniswap
Uniswap uses an automated market maker(AMM) system, which allows for more efficient price and liquidity provision. It allows users to trade crypto anywhere without an intermediary.
By pooling tokens to Uniswap liquidity pools, users can earn rewards. Anyone from anywhere can supply tokens to liquidity pools. Users can create liquidity pools on Uniswap. It allows users to control their funds. Uniswap’s blockchain is open source so anyone can view and contribute to the blockchain’s code.
- Aave
AAVE allows users to securely lend and borrow cryptocurrency. AAVE users have complete control over their funds as a smart contract governs the transfer of funds between lender and borrower. Lenders can earn passive income by providing liquidity to the market and borrowers can obtain loans.
AAVE was built on Ethereum network and used Ethereum blockchain to process transactions. They are known as ERC20 tokens.AAVE protocol uses a decentralized autonomous organization (DAO) as it is operated by the people who hold AAVE tokens.
- Synthetix
Synthetix is an Ethereum-based protocol for issuing Synthetix assets. It tracks and provides the returns of another asset without requiring you to hold that asset. Synthetix brings non-blockchain assets into crypto ecosystem.
- Curve DAO Token
Curve is a native utility token of the Curve platform, a protocol focused on giving users the ability to easily swap certain Ethereum-based assets. The Curve token is used for governance in the platform and as a reward for providing liquidity. DAO is an in-house token of Curve that uses Ethereum-based creation tool Argon to connect multiple smart contracts used for users’ deposited liquidity.
- Compound
Compound is an Ethereum-based market protocol that allows holders of crypto to lend and borrow funds in exchange for collateral. Lenders can send their tokens to generate interest. Borrowers are permitted to borrow cryptocurrencies supported by Compound.
- PancakeSwap
PancakeSwap is a popular decentralized exchange allowing BEP-20 token swaps on the BNB Chain. The exchange employs an automated market maker (AMM) model, allowing users to trade against a liquidity pool. Participants can become a liquidity providers and receive LP tokens, which entitle users to a share of the exchange’s trading fees. LP token holders can also engage in yield farming to earn CAKE, the exchange’s utility token.
- Balancer
Balancer is a DeFi protocol running on Ethereum, where users can create funds based on cryptocurrencies in their portfolios. These funds are known as Balancer pools and any user wishing to provide liquidity to a protocol can do so by simply depositing an asset in them.
- Yearn.finance
Yearn.finance is an Ethereum token that governs the Yearn.finance platform. The platform is a yield optimizer that moves funds around the DeFi ecosystem in an effort to generate a high return. The project’s primary purpose is to simplify yield farming for the masses.
- SushiSwap
SushiSwap is an Ethereum token where users can sell and purchase digital assets.SushiSwap is a copy of Uniswap with some changes to Uniswap’s open-source code.SushiSwap allows users to create a liquidity pool by providing ETH and any ERC20 tokens. SushiSwap uses the Automated Market Maker (AMM) model, which allows users to swap their tokens using collections of digital assets called liquidity pools.
10. JOE
JOE is the native token of Trader Joe, a decentralized crypto exchange on Avalanche blockchain. The exchange offers a suite of crypto trading products like swapping, yield farming and crypto asset staking. Users can provide liquidity by participating in one of its yield farms and earn JOE as a reward token, which can later be staked and used to vote in governance proposals.
| DeFi Yield Farming Protocols | Platform | Cryptocurrency |
| Uniswap | Ethereum | UNI |
| Aave | Ethereum | AAVE |
| Synthetix | Ethereum | SNX |
| Curve DAO Token | Ethereum | CRV |
| Compound | Ethereum | COMP |
| PancakeSwap | Binance Smart Chain | CAKE |
| Balancer | Ethereum | BAL |
| Yearn.finance | Ethereum | YFI |
| Sushiswap | Ethereum | SUSHI |
| JOE | Avalanche | JOE |
Related: Exploring the Rise of Decentralized Finance (DeFi) and Its Impact on Traditional Finance
Conclusion
DeFi Yield farming is the most popular way to earn passive income there is plenty of opportunities that can bring a substantially better return on capital. Of course, this comes with certain risks. Although yield farming has a good potential for increasing user adoption and attracting more people to use DeFi protocols it can also make life harder for normal users who may not be interested in yield farming.
Frequently Asked Questions (FAQs)
What is DeFi?
DeFi stands for decentralized finance. It refers to the decentralized financial services on blockchain.
It provides all the services that banks offer lending, borrowing, insurance and many more.
What are the benefits of DeFi Platforms?
DeFi Apps allow users to transfer capital around the world, It provides a high level of security to users, provides the superior speed of blockchain technology resulting in faster and speedy transactions, Users have more control over their finances.
Is Yield Farming better than Staking?
Yield Farming could be a better choice for those who want to earn high returns but it is highly risky. Staking might be good for those who want a straightforward method with low risk.
How do I start yield farming?
You can start yield farming by depositing crypto into a decentralized finance platform that promises returns.
How to make money with DeFi yield farming?
DeFi Yield farming allows users to lock their assets for a certain period of time to earn rewards for their tokens.