Yield farming, or liquidity mining as it is also known, is the way defi protocols such as Maker and Compound are attracting huge quantities of fresh capital into decentralized finance. Decentralized finance has traditionally suffered from lower liquidity than centralized finance and exchanges.
To incentivize investors to provide liquidity for the sector by locking up their assets in liquidity pools, protocols offer benefits including tokens. Yield farmers providing liquidity to defi protocols in order to receive these rewards and ‘farm’ the protocol tokens. In some cases, the returns are extremely lucrative. The strategy has encouraged huge amounts of capital to enter decentralized finance, with liquidity on decentralized protocols often overtaking that of their centralized peers.
Today there are many yield farms to choose from, each with their own risk and reward profiles. The challenge is navigating these farms successfully to maximize profits while minimizing risks.
Until now, the barriers to entry for would-be yield farmers have proved incredibly high. Newcomers and defi outsiders face a near impossible task learning the deep intricacies of successful yield farming strategies. So while a few enjoy the gainful bounty of their yield farming harvest, the rest of the blockchain space looks on, empty-handed and bewildered.
Yield farming is not easy. While the practice can be highly lucrative for the few who are already adept, newbie mistakes can be equally costly. The yield farming industry contains no instruction manual.
As the industry has grown, the number of available investment options has grown with it, and each with its own risk and reward profile. It is a dynamic and ever changing sector in which the best and most worthwhile farming strategies are continually changing. Keeping up with which farms are fresh, and which are less so, is a full time job.
Here we take a look at some of the most common pain points in the current yield farming sector:
1. The learning curve is too steep
2. Managing multiple farms is extremely time consuming
3. Defi is expensive and yield farming is for whales, not everyday crypto users
Thanks to the projects like YFarmer we now have an access to a yield farming algorithm which optimizes yield returns with a single click. It enables all crypto investors — not only whales — to benefit from the best and latest farming strategies, and will open up yield farming to the crypto masses.
In my humble opinion, the more projects like YFarmer goes live on the market, the more opportunities open in front of the DeFi community.
Share your thoughts on this topic, would be glad to discuss.