Types Of Defi Yield Farming and It's Future Scope

To put it another way, DeFi yield farming is an investment strategy. Assume you have $1,000 in cryptocurrency on your person. Using a yield farming platform, you can pledge your crypto asset and earn interest on the amount pledged. Even more intriguing is the fact that the crypto you pledge will be used to provide asset liquidity to platform traders. You can make a lot of money in the process. Of course, there's a chance you'll go home empty-handed. DeFi yield farming, on the other hand, could offer huge interest rates in the range of 100 percent or even more than what banks offer on deposits. As previously stated, it is a high-risk, high-reward investment strategy.

The Reason for the Increase in Yield Farming

The unexpected surge in interest in yield farming can be attributed to the arrival of the COMP token – the Compound Finance ecosystem's governance token. Governance token holders gain governance privileges, allowing them to participate in the governance of the DeFi protocol. The distribution of these governance tokens algorithmically with liquidity bonuses is a common way to start a decentralised blockchain. Liquidity providers are enticed to 'farm' the new token by providing liquidity to the protocol.

The COMP boosted the popularity of this type of token delivery model. DeFi ventures, on the other hand, have devised new methods for bringing liquidity into their environments.

Various types of farming yields

Three of the most well-known yield farming platforms are Compound, MakerDAO, and Aave.

Let's take a look at what they have to offer.

Compound is an algorithmic loan and lending platform. Any user with an Ethereum wallet can immediately start earning money by lending their money to Compound's liquidity pool. An algorithm based on the supply/demand ratio is used to calculate rates.

MakerDAO is a decentralised lending platform that lets you buy DAI tokens with ETH, BAT, USDC, or WBTC. DAI is a stable coin with a 1:1 US dollar exchange rate. Yield farmers frequently use issued DAI to carry out their investment strategies.

Aave is a decentralised loan and credit protocol widely used by yield farmers. The lending party (liquidity providers) receives Tokens in exchange for their funds. When these tokens are issued, they start generating revenue right away.

In finance, cryptocurrency economics, and computer science, decentralised finance, and specifically yield farming protocols, are a technological and financial breakthrough.

Conclusion

The DeFi industry has gotten a lot of press recently. After Compound gave away COMP management tokens and some of their holders claimed annual returns of 100%, the community became obsessed with DeFi yield farming. That is why, now more than ever, it is critical to consider your yield farming development. Suffescom is a leading DeFi Yield Farming Development Company, with many yield farming protocols that run on Defi platforms, making a significant difference in the ecosystem. Suffescom can assist you in developing a business-oriented Defi yield farming platform.