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US 900 percent "interest" and more: This is behind the farming of crypto currencies

08:25  26 february  2021
08:25  26 february  2021 Source:   t3n.de

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Anyone who wants to increase their crypto assets gets a tool with Yield Farming. With farming, profits of several hundred percent can be achieved - but of course not without risk. Mit dem Farming von Krypto-Coins lassen sich hohe Gewinne einfahren. © Shutterstock / Scharfsinn With the farming of crypto-coins, high profits can be made.

In farming, you use smart contracts to lend your money and collect fees in the form of a crypto currency.

How does farming work?

The concept of yield farming is closely linked to the development of decentralized financial markets (DeFi) , which in turn are based on blockchain technology. A special permit is not required to participate in these marketplaces, the existence of a wallet with crypto currencies is sufficient. There are no intermediaries here and they are not required. This simplified interaction and the use of blockchains enables new applications such as yielding.

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Farming can be done in different ways. For example, it is possible to use DeFi platforms and lend tokens there. Anyone who borrows the crypto currencies has to pay interest for it. The interest rate depends on the platform and is variable. There are different approaches as to how the generation of interest on the DeFi platforms can be optimized.

Farming on platforms such as Pancakeswap support different crypto currencies and DeFi projects. (Screenshot: Pancakeswap / t3n)

Fees are charged for using the platforms, which are passed on to the participants who provide the liquidity. So whoever pays money into the so-called liquidity pool receives these fees according to their share in the pool. The specific design of corresponding marketplaces can be very complex and is currently changing.

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Which tokens are popular for farming?

High interest rates can often be seen on pancakes swaps. Pancakeswap is a decentralized crypto exchange on which BEP20 tokens can be exchanged on a Binance Smart Chain. The use of the Binance Smart Chain is a specialty, as uses most of the similar exchanges Ethereum . Pancakeswap attracted attention with the performance of its token : The price rose over 900 percent at times. The exchange supports liquidity mining and token staking to generate returns. The token is popular with cryptocurrency users for performing the yielding described here. Many yielding strategies are therefore based on pancake swap.

How can I use farming for my investments?

Whoever wants to participate in yielding must pay into one of the available liquidity pools. To do this, you connect your wallet to the pool, provide the desired liquidity and then receive your reward. The reward is in the form of tokens that represent your share of the liquidity pool. For every swap made in the pool you will then receive further rewards. In order for this to work, the tokens must first be staked. The platform must therefore use protocols with the corresponding functionality for this. Of course, it is always possible to break the stakes again.

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usr: 1
This is interesting!