Earn with Decentralized Finance
DeFi has opened up many opportunities for passive income. Decentralized finance has enabled unique financial services in which the need of centralized authority is eliminated. Smart contracts actually perform the operations in DeFi applications and all transaction data is stored on blockchain which is also a decentralized network. Through DeFi platforms, users can lend or stake crypto, and provide liquidity to earn money. In yield farming, you basically deposit your assets in liquidity pools to provide liquidity. The rewards that are generated depends on how your assets are utilized in trades, and other activities like lending/borrowing. Some platforms also provide the ability to automatically re-invest rewards into other liquidity pools to earn even more rewards.
Furthermore, many DeFi platforms now offer yield farming bots which automatically deposit your assets in specific pools and re-invest the rewards into others to maximize your earnings. Just like centralized crypto services, decentralized finance also offers flexibility over many passive income and portfolio management methods.
Choosing the best platform
In this review, we compare factors such as user-friendliness, available liquidity pools, reward rates, safety and risks, for different platforms. Some platforms also offer unique strategies like yield bots and yield optimization. These may be suited for advanced investors. If you are a beginner, you can start with simpler yield products rather than moving to advanced strategies.
- Yearn.finance
Developed in 2020, by a software developer Andre Cronje, Yearn Finance has gained much popularity as the best yield farming platform. It acts as yield optimization platform that offers the best yields for users. Its core offering is vaults which are tools that search the best yield opportunities across various DeFi protocols and automatically deposit users’ assets in that. Beginners may struggle to use this platform especially the vaults which requires prior knowledge of yield optimization strategies. But interestingly, Yearn Finance also gives the option to stake yCRV with boosted APR rates which depends on how long you stake. Moreover, you can also stake yETH and yPrisma coins to earn rewards. But the top product is v3 vaults which identifies the best yield opportunities across various DeFi protocols and may lend crypto, deposit the assets in liquidity pools or may perform other complex operations on the DEXs and lending platforms to generate rewards for user. Vaults work automatically so users do not have to manage their investments.
- Curve Finance
Curve Finance is a decentralized exchange that was developed by Russian scientist in 2020. It’s unique approach to AMM system (Automated Market Maker) enables high liquidity and also reduces slippage for stablecoin trading. Wide range of pools are available especially stablecoin pools, where you can deposit crypto assets to start earning rewards. Curve finance can use the deposited assets to provide liquidity for its AMM system, or use the tokens to provide liquidity on other lending platform. So, the rewards that user earns are combination of trade fees, and interest generated by lending. Apart from yield farming, you can also borrow crypto or lend crypto assets. Overall, it is a good platform for yield farming.
- SushiSwap
It is a popular decentralized exchange built on Ethereum blockchain. Sushiswap has gained popularity as one of the reliable decentralized exchanges with great community. It has a large number of pools some of which offer lucrative APR rate for liquidity providers. Users also have option to stake liquidity tokens to earn staking rewards alongside trade fees. Moreover, they can also stake SUSHI tokens.
SushiSwap also introduced smart pools which increase capital efficiency for liquidity providers. Through the smart pools, users can concentrate their liquidity in specific price ranges which includes upper and lower price boundary. This unique mechanism reduces price slippage and impermanent loss greatly and offers advantage to LPs. It’s also worthy to note that this mechanism is not available on all yield farming platforms.
- Pancake Swap
Pancake Swap is also among the most popular decentralized exchanges. It uses AMM system to facilitate trading and achieve high liquidity. Pancake Swap’s liquidity pools, also known as farms provide very high APR rates compared to other yield farming platforms. It provides APR rate up to 985%, which is made possible by Pancake Swap’s liquidity farming mechanism. Liquidity providers have ability to stake their LP tokens. Pancake Swap allocates specific portion of CAKE token emissions as incentive rewards which alongside trade fees, and LP staking rewards are given to liquidity providers. This platform is suitable for both beginners and professional investors.
- Uniswap
Being the world’s largest decentralized exchange, Uniswap has highest trading volume and very high liquidity. Due to a dedicated team of liquidity providers, this platform has sustained high levels of liquidity to facilitate trades between users. Uniswap offers wide range of liquidity pools with varying APR rates. Users also have the options to concentrate their liquidity in specific price range and select fee tiers. These features provide a great experience for liquidity providers. You can simply deposit specific amounts of tokens for a pair and start providing liquidity to earn rewards. You would not earn any rewards if market price moves outside the range you have determined, which is important thing to remember.