Mary Amakihi 
Large-scale yield farming is becoming a significant trend in the cryptocurrency investment space, influencing the future of finance. This article examines how compound and Aave shape the yield farming landscape.
Understanding Yield Farming?
Yield farming, known as liquidity mining, has become popular in decentralized finance (DeFi). It is the process of earning passive money by supplying liquidity to multiple DeFi protocols.
Simply put, yield farmers lend or stake their cryptocurrency assets, allowing others to borrow or use them while earning rewards in exchange.
These benefits are often in the form of additional tokens or a portion of the transaction fees.
How Does Yield Farming Work?
Yield farming is based on the concept of automated market makers (AMMs) and liquidity pools.
AMMs are smart contracts that enable decentralized trading by utilizing algorithms to calculate token prices based on available liquidity.
Users construct liquidity pools by contributing their tokens to them, allowing for seamless trading and reducing slippage.
Participants in yield farming deposit their tokens into liquidity pools, becoming liquidity providers (LPs). In exchange, LPs earn liquidity provider tokens (LP tokens), representing their pool percentage.
These LP tokens can be staked in yield farming processes to win more rewards.
Let us discuss how compound and Aave are shaping the yield farming landscape among other DeFi yield farming protocols.
Top Yield Farming Protocols
Here are some of the yield farming protocols that are shaping the yield farming landscape.
- Compound
- Aave
- Uniswap
- PancakeSwap
- Curve finance
- Venus
- SushiSwaps
Compound
Compound finance allows you to borrow against collateralized assets. It will also enable depositors to deposit money and receive Compound tokens, the platform’s governance tokens.
The project runs on the Ethereum blockchain and gives users prizes for using their platform.
Aave
Regarding the best yield-farming protocols, Aave cannot be disregarded. In terms of yield farming, Aave is a strong contender.
It is a popular open-source liquidity protocol that allows users to borrow and lend cryptocurrency. Aave is one of the most popular yield farming platforms, with a market value of over $3.4 billion.
The native token for Aave is AAVE. The token incentivizes users to use the network by offering fee savings, voting power for governance, and other incentives.
Aave is an Ethereum-based decentralized network that offers low-interest cryptocurrency lending and borrowing. It allows customers to earn interest on their deposits.
However, market borrowing demand will heavily influence the amount of interest generated. The interest rate is automatically adjusted based on the current market conditions.
The AAVE coins enable quick earnings and compound interest in the investing funds. Users who deposit more money are more likely to receive more significant token amounts. Also, Aave offers flash loans to users.
This appealing functionality and other features make it a popular platform among DeFi users.
This website allows users to earn approximately 15% APR for lending. That demonstrates the enormous benefits that Aave provides to its users.
Uniswap
Uniswap is also one of the best crypto yield farming technologies you should know about. It is commonly referred to as the king of DeFi exchanges.
It is one of the most advanced decentralized exchanges on the Ethereum network. It enables customers to use its liquidity pools to earn higher interest on their cryptocurrency holdings.
It allows users to swap thousands of ERC-20 tokens. Liquidity providers might receive a percentage or portion of trading fees on each swap.
Uniswap is a platform that requires liquidity providers to stake both pool sides equally. The platform’s interest rates will fluctuate depending on market conditions and the pool.
The frictionless characteristic of Uniswap makes it an excellent platform for trustless token swaps. There are several versions of Uniswap which confuse users.
However, each update improves the exchange’s accuracy and capital efficiency. That implies users can get better rates and lower prices.
Currently, there are two active versions: V2 and V3. The latest Uniswap V3 version is continually expanding, with over 200 integrations.
However, investors must exercise caution when depositing assets into liquidity pools. This is because abrupt price movements can result in considerable short-term losses.
Also, like all other DeFi systems, there is a risk of smart contract failure, resulting in significant losses. The Uniswap protocol’s gas prices can be substantial because it is built on the Ethereum platform.
The good news is that no sign-ups or identification verification are required to use the app.
PancakeSwap
When it comes to the best yield-farming procedures, you’ve probably heard about PancakeSwap. However, if you are new to cryptocurrency, you may have heard of PancakeSwap for the first time.
It was launched in 2020 and is one of the highest-yield farms on the Binance Smart Chain. This protocol has expanded fast over the years and has a trade volume of over $400 million today.
PancakeSwap enables customers to yield farms by providing liquidity. In return, users receive Liquidity Pool tokens, which can be converted into CAKE or other cryptocurrencies.
To generate income on PancakeSwap, users may become liquidity providers or stake their native tokens for rewards.
To become a liquidity provider, you must add tokens to the liquidity pool and farm the denominated coin.
The most tempting elements of this yield farming platform are its high yields, low transaction fees, and substantial awards.
The platform supports non-fungible tokens (NFTs), BSC token exchanges, and staking pools that earn interest.
Also, PancakeSwap provides a gambling game in which you must predict the future price of Binance Coin (BNB). The platform also incentivizes DeFi users with lotteries.
The fascinating features encourage more users to use this platform for yield farming.
However, PancakeSwap does come with some hazards. Some of the potential risks include smart contract failure and temporary loss as a result of price volatility.
Curve Finance
Curve Finance is one of the highest-yielding farming pools on the market. With over $19 billion in total value locked, the Curve Finance platform is the largest DeFi platform.
Curve Finance has been specifically built to enable effective crypto trading and substantial yearly interest returns. Compared to other DeFi platforms, the platform offers a market-making algorithm that best uses lock funds. This method benefits both liquidity suppliers and swappers.
Curve Finance offers a comprehensive variety of stablecoin pools with attractive APRs. Curve Finance’s APRs are relatively high. It ranges from approximately 1.9% to 32%.
Additionally, the platform enables users to trade stablecoins with minimum slippage and fees. Stablecoins are thought to be safer due to their consistent base value.
However, it is crucial to realize that Curve Finance still has significant risks. The primary dangers for all platforms are smart contract failure and temporary loss.
Venus
Venus is also among the highest-yielding farming pools on the Binance Smart Chain. It is a popular algorithmic money market that enables decentralized borrowing and lending.
Users can deposit their crypto assets, such as ETH, BNB, and stable currencies, to earn handsome income.
In addition, Venus offers users a simple and intuitive asset borrowing and lending option. It allows users to borrow cryptocurrency against specific collateral. Additionally, users can lend assets to earn rewards.
The platform’s key characteristics include low-cost and rapid transactions. It also provides a large amount of liquidity and wrapped tokens. Users can utilize their collateral to borrow assets.
Venus protocol is unique because it allows users to mint synthetic currency at over-collateralized locations to invest in the platform’s financial goods.
Another appealing aspect of the platform is that it allows users to win numerous incentives.
Launched in 2020, the platform rapidly evolves and has emerged as one of the market’s leading protocols. The Venus protocol has approximately $1.5 billion of assets on BSC.
SushiSwaps
SushiSwap is widely regarded as one of the top-yield farming cryptocurrency platforms available today.
This decentralized exchange provides various services, including trading, staking, and yield farming.
SushiSwap, created on the Ethereum network, supports over 350 tokens, and investors can connect their crypto wallet to the platform to start yield farming their favored pairs.
SushiXSwap (a cross-chain solution) was one of the most popular items in 2023, and it is now available on seven different networks.
There are over 500 yield farming pool pairs to choose from. The majority are coupled with either ETH or USDT. For example, USDT/ETH currently yields 13.72%, whereas YFI/ETH yields 4.24%.
Investors should remember that higher yields are usually associated with greater risk. Pairs with high yields often include at least one low-cap coin, so investors should expect extreme volatility.
To use SushiSwap, users first connect a supported wallet such as MetaMask, Trust, or Gnosis and then select a suitable yield farming pair. Investors may withdraw their tokens and prizes at any time.
Conclusion
Yield farming is quickly becoming one of the most popular strategies for increasing earnings in the cryptocurrency market.
Now that you have a comprehensive list of the finest yield farming platforms, selecting the proper one will be relatively simple.
However, make sure to explore all of the platforms to see which is ideal for you. When making investments, keep in mind the platforms’ possible hazards.
The DeFi space is emerging and expanding at a rapid rate. It is unlikely to slow down very soon.
New farming practices are bound to arise as investors seek to make the best use of their assets while maximizing returns.
As a result, staying current on new strategies is critical for remaining profitable. Leverage the high-reward, high-risk-yield farming approach to earn high returns on your investment potentially.