Yield Farming is a way to earn cryptocurrency using cryptocurrency.
In other words, it involves lending your cryptocurrency to borrowers through a semi-automated market for which you make incentives in the form of the transaction fee, interest, or tokens in return. It is a type of fixed income earning investment that did not really exist until a couple of years ago.
Yield Finance is based on Decentralized Finance. It started booming in June 2020 when DeFi projects Compound and Aave launched. Since then, these systems have mushroomed eightfold, and according to DeFi Pulse, $11 billion of crypto collateral is locked in.
If you are looking to make profits by investing in Yield Finance, here are 5 coins to look out for.
1. Dai [DAI]
Dai is a decentralized, crypto-based stable coin seeking to maintain a stable value concerning the US Dollar. Its decentralized nature is a significant building block for the Decentralized Finance (DeFi) movement.
Dai was first introduced in a white paper published in December 2017. And was developed by a Decentralized Anonymous Organization known as Marker DAO.
When tied with Ethereum, at the time of writing, Dai returns an annual percentage yield (APY) of ~15.5%.
2. Tether [USDT]
Tether was launched in 2014 and was initially named Real coin. It is another stable coin backed by various fiat currencies such as U.S. dollar, Japanese Yen and Euro. It aims to keep the prices of cryptocurrencies steady, contrary to varying swings such as Bitcoin and Ethereum.
Tether was designed in such a way that it would serve as a bridge between fiat currency and cryptocurrencies. It also seeks to provide stability, transparency, and low transaction charges to its users.
Currently, if linked with Sushi and Ethereum, Tether offers an APY of ~16.30%.
3. USD Coin [USDC]
Similar to Tether, USD Coin is a US dollar-backed stable coin that was launched by Circle. Although tether is a highly popular stablecoin, the USD coin is establishing itself in the DeFi sector as a go-to asset for Yield Farming.
USDC is the most lent and borrowed coin on the Compound protocol. When tied to Dai, the currency currently offers a ~9.75% return to yield farmers annually.
4. Yearn.Finance [YFI]
Earlier this year, Andre Cronje, a fintech developer, launched Yearn.Finance after spotting inconsistencies in the yield offered by various DeFi products. It is an Ethereum based protocol that aims to be the gateway for several yield-generating products in the Ethereum Ecosystem.
Yearn Finance seems to be an exciting protocol that builds unique DeFi projects and is a popular yield farming currency. At the time of writing, YFI tied to DAI offers ~15.79% annual percentage yield.
5. SushiSwap [SUSHI]
This quirkily named coin was founded by two anonymous developers named 0xMaki and Chef Nomi. The Sushi token entitles its holders to governance rights, and a small portion of the fee is paid to the protocol.
Put merely, SUSHI holders get to ‘own’ the protocol.
SUSHI is clearly among the favorite coins of yield farmers. Within one week of launch itself, SushiSwap managed to get $1 Billion in locked funds. Currently, SUSHI tied to Ether gives ~21.73% API to the yield farmers.
Yield Farming is a hot topic in the crypto market, and the above mentioned are doing quite well. However, before you enter the Yield Farming space, there are two things to remember:
Yield Farming requires heavy capital investment to make a substantial profit.
It is complicated stuff.
So, if you are looking to explore this lucrative investment, make sure to do adequate research and analysis in advance.
[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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