There were just a few places to benefit in the early days of crypto assets. Trading was one choice. The other option was to merely keep the investments in the expectation that their value would increase at an unusually high rate.
Later on, several methods of holding crypto assets for the purpose of earning interest emerged. Any of the schemes turned out to be rip-offs. To be able to finance its Ponzi scheme, Bitfinex depended on a steady inflow of new funds as well as Bitcoin appreciation.
The crypto business, on the other hand, could not bear it when digital coins and tokens sat idle, hoping for a boost. A form of decentralized finance emerged in the summer of 2020, promising to generate more stable, consistent money flows by trading and lending algorithms. As a result, owners of whale-sized wallets may see some of their investments appreciate, whilst others may need to borrow money to fund trading positions.
Yield farming is one of the most important aspects of this open finance ecosystem. In the broadest sense, it refers to the storage of digital coins or tokens in dedicated smart contracts. These smart contracts will then be used to create liquidity for a variety of other ventures, such as crowdfunding, decentralized markets, and the development of dollar-pegged coins and tokens.
Yield farming is a high-risk, high-reward technique for gaining cryptocurrency. Any of the threats are technological in nature, such as smart contract vulnerabilities or transaction errors. A yield farming protocol's funds are not assured. When a coin or token is part of a highly unpredictable pair, the yield farmer will lose money and have to depend on a demand turnaround to recoup their losses and return to profitability.
Since decentralized finance (DeFi) expanded to possess over $25 billion in all ventures, vaults, and smart contracts, yield farming is here to remain.
We looked at several upcoming projects to assess the risks and advantages of having liquidity and using a yield farming approach rather than a buy-and-hold strategy.
SyncBond
SyncBond is a project that accepts cryptocurrency funding and issues cryptocurrency-based bonds. The SYNC token, which is currently being launched over the course of a year, will be one of the most important methods for generating passive income. The SYNC token would not be trapped explicitly inside liquidity supplier pools, unlike most yield farming programs. SyncBond, on the other hand, has opted to establish a crypto bond.
This is a distinct, entirely crypto-based financial product that mixes equivalent dollar values of SYNC tokens and UniSwap liquidity tokens at the time of issuance. The bond is a non-fungible coin (NFT) on the Ethereum blockchain that can be exchanged on the secondary market.
A bond has the advantage of holding all sides of a liquidity pair. This means that SYNC is still combined with a certain number of UniSwap liquidity tokens and that the pair's liquidity does not run out. As a possible longer-term buy and hold option, the crypto bond has the benefit of retaining all properties.
Permanent failure is still a possibility for crypto bonds, but SyncBond works to minimize this risk by maintaining stable liquidity.
Traders who seek arbitrage between the UniSwap trading pair and another exchange with higher asset values are more likely to experience impermanent loss.
UniFarmer
UniFarmer is another high-yield farming project on the rise. It's already in the token selling stage, and it'll launch months after some of 2020's hottest yield farming ventures.
UniFarmer is a solution to a problem that small-scale investors face. Thanks to high Ethereum gas fees, choosing a liquidity pool and transferring funds on one's own can be daunting or prohibitively costly. UniFarmer selects a pooled, automatic yield farming model that maximizes yield for the majority of consumers.
With a limited supply of 150,000 tokens, the UNIF token would initially target for a small-scale liquidity pool of about 80 ETH. Purchasing UNIF at 500 tokens every 1 ETH is equivalent to investing in an initial coin offering (ICO), but the asset would be liquidated instantly by a decentralized yield farming smart contract. UniFarmer is a smaller project than any of the other well-known DeFi start-ups. Yield cultivation, on the other hand, will yield large returns even for small ventures.
JuiceSwap
Staking, yield farming, a non-fungible token economy, and a decentralized exchange are all part of JuiceSwap's now completely functional project. JuiceSwap, which began operations in January 2021, is based on the concept of automated market makers, or algorithmic trading.
JuiceSwap is proof that there is still need for new outlets in the DeFi community. The fundamentals of JuiceSwap trading depend on the well-known UniSwap formula for automated market-making. A ratio of two crypto assets is calculated using the formula X*Y=K, where K is a constant.
To control the yield farming features, JuiceSwap takes the standard route of unlocking METAMASK or WalletConnect.
