Yield Farming Academy #3 Passive income in DeFi This is the third lecture in the series on “Leech Protocol” from our Yield Farming Academy. Today, we will delineate the passive income streams on DeFi. Here are the topics we will cover:: So settle in, get ready to explore, learn, and discover together.” What is Yield Farming/Staking? Yield farming is the strategy of using crypto in DeFi protocols generate additional crypto. Unlike speculative operations where the multiplication of assets are carried out through buy and sell operations, yield farming is more like traditional farming where the user “grows” new assets (“harvests” as an example), and“locking” crypto in protocols and smart contracts (“soil” as an example). One of the strategies behind yield farming involves depositing tokens into a liquidity pool within a decentralized finance (DeFi) platform ?. A liquidity pool can be described as a smart contract responsible for storing funds. Participants receive liquidity provider (LP) tokens upon contributing liquidity thatrepresent their share of the pool’s assets. The protocol distributes transaction fees incurred by traders utilizing these pools among LP token holders. Some DeFi platforms may also offer native governance tokens as extra rewards, encouraging engagement and a decentralizing decision-making asset. The second most popular yield farming strategy is Staking. Staking in DeFi is the process of locking crypto assets in smart contracts for a profit. Unlike liquidity mining, participation in staking does not require the provision of two types of assets within the the liquidity pool. Staking performs the opposite task: it “freezes” tokens for a long time so that holders do not sell theirs for speculative purposes. This reduces the circulating supply, protecting token prices from a sellers’ pressure. By staking their coins, participants help validate transactions and secure the network. In return, they receive rewards, such as additional cryptocurrency tokens or a share of transaction fees, depending on the specific blockchain protocol. Staking is generally more straightforward than yield farming, as it involves fewer steps and often requires less active management. However, the rewards may be lower compared to some yield farming strategies. The Benefits to Users Both yield farming and staking offer several benefits to users Benefits of Yield Farming: Benefits of Staking: Overall, yield farming and staking offer users opportunities to earn rewards while actively participating in the cryptocurrency ecosystem. However, users should know the associated risks and complexities before engaging in either activity. Explain how it works + include examples of platforms. Let’s delve deeper into how yield farming and staking work, along with examples of platforms for each: Liquidity mining / providing: Liquidity mining in decentralized finance (DeFi) protocols work by locking up cryptocurrencies in liquidity pools. These pools facilitate trading activities within the DeFi ecosystem. Here is a step-by-step guideline: Examples of Yield Farming Platforms: Staking: Staking involves holding and locking up a certain amount of cryptocurrency in a smart contract or validator to participate actively in a blockchain network’s operations. Stakers help validate transactions and secure the network in exchange for rewards. Here are how they typically work: Examples of Staking Platforms: Considerations/tips Before entering into one of these types of earnings, you need to weigh the pros and cons and responsibly approach any pitfalls that may occur. Here are some considerations and tips: The Simplest Ways to Earn Passive Income in Crypto Twitter Facebook Telegram
