FAQ 30 – What is Yield Farming?

Definition of Yield Farming

Yield Farming is the most popular of the three existing ways to monetize assets among the DeFi world by providing cryptocurrency investors with a way to earn passive income. Yield Farming allows you to get the best return from the Challenge. Yield Farming makes it possible to obtain interest thanks to crypto-currencies. Your remuneration is made in the form of interest and depends on the funds you have deposited.
Le Yield Farming permet d’obtenir des intérêts grâce aux crypto-monnaies.Votre rémunération s’effectue sous forme d’intérêt et dépend des fonds que vous avez déposés.

The term “farming” refers to what one is ready to immobilize in terms of passive income acquired (in crypto-currency). This allows the blocking of assets and the generation of tokens. These will then be made available to users as a loan.

Thanks to various strategies put in place, it is possible for a “farmer” to move his crypto-currencies between different platforms. This move increases the performance. This system is complex for beginners since none of the strategies used are known.

How does “farming” work?

“Farming” is the principle of obtaining passive income through the deposit of cryptocurrencies in a “cash pool”.

As a reminder, a liquidity pool is a “set of funds deposited by liquidity providers in a smart contract”.

Among the liquidity pools, we find two categories:

– On the one hand, users have the possibility to exchange their tokens and use them both.

– On the other hand, the suppliers: they represent the Yield Farming

Malgré les avantages que le staking peut présenter, celui-ci est aussi soumis à de nombreux risques.

Yield Farming Risks

First of all, it is not easy to perform Yield Farming, a wrong manipulation can quickly happen. However, incorrect manipulation can lead to significant costs. In addition, you never know what the value of the token will be, it can be very high or not at all. Finally, Yield Farming remains an online system, therefore the main threat therefore remains hacking, in particular through the diversion of certain smart contracts.

Benefits of Yield Farming

Despite the threats seen above, Yield Farming also has many advantages.

This allows you to generate interest through passive income.

In addition, Yield Farming can distribute capital directly to investors without having to contact banks or investment funds.

Le staking présente de nombreux avantages.

How is Yield Farming different from staking?

Unlike staking, Yield Farming is more complex and riskier. Indeed, it confronts investors more with a possible loss due to price volatility.

Additionally, Yield Farming users deposit cryptocurrency on Gold Challenge platforms, but with staking, investors use their funds to support the blockchain as well as validate blocks on the network.

The Future of Yield Farming​

Yield Farming has a very promising future, in particular thanks to technological advances, and the permanent evolutions of the Challenge. It is very popular and allows to generate rewards with cryptocurrency assets.