Yield Farming in Decentralized Finance – Not Like Raising Pommerac
Author: Jason Dookeran
Everyone in the Caribbean should at least know about pommerac. When you have a tree, and the season rolls around, every one of your neighbors shows up to ask for a lil sumn-sumn. Imagine you had a whole plantation of pommerac? With each tree bearing a little pile of fruit that you could collect and sell, or take the seeds from and plant to make more trees? Decentralized finance has something like that, except it’s nowhere near as labor-intensive as growing pommerac.👩💻
What’s Yield Farming?
Decentralized finance offers individuals a chance to invest in things they believe in. Lacking the usual limitations that investment instruments usually have, anyone could get into them. Yield farming is one of the ways that a person can make money from decentralized finance. According to Coin Market Cap, yield farming is where you stake or lend your cryptocurrency of a particular type for interest on the investment. Interest yuh say? But ent yuh could get interest from ah bank too? Well, yeah, but the bank gives you less than 1% in interest per annum, and you could make up to 10% (sometimes more) from yield farming a year. Clearly, dey chinksin’ on the money you could earn.
The issue with yield farming is that it can be diminishing returns with time. The APY (yield per year) return on an exchange may change daily, requiring you to keep up with what’s going on in the field. It has the potential to be a long-term capital gain instrument, but only if the currency continues to go up in value. Decrypt has a handy tutorial on how to get started on yield farming if you want to learn more about this method of earning from blockchain investment. In my next article, I’ll go into how to ensure your crypto investment doesn’t lose value thanks to the beauty of swaps, and why exchanges even exist.
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