Looks like we’re back to playing Farmville the previously famous Facebook game but this time in the Crypto world. So what is all this hype about?
Basically, you put your crypto tokens up to a smart contract and provide liquidity and in return would get a share of the transaction fees and token rewards. Why is it so lucrative is because they promises up to 9999% APY (Not exaggeration) and people are going in for that quick buck. Who doesn’t want it? Well, I’m here to share you my experience and some findings based on my own trial and errors.
Defi (Decentralize Finance)
In layman terms, basically anyone in the crypto space can be their own “bank”. Instead of going to a bank to obtain loan, we can instead borrow, loan and earn interest through various decentralize platforms. Examples in the Ethereum space such as AAVE, Compound, Maker and for Binance Ecosystem there are Cream, Venus, and Fortube. However please bear in mind that the process of performing Defi is risky and please do further research on different networks as well.
Before doing this step, you will need to have to transfer your Crypto from either an Exchange to a Hot Wallet such as Metamask or Trustwallet on the Binance smart chain network. I have included the links on how to perform it on the links while you got it setup.
Please also take note that and find out whether the Crypto you hold whether it sits on ETH chain, Binance Chain or other chain such as TRON, Omni, etc.
When transferring through different chain such as ETH(ERC20) or Binance(BEP20) make sure that you select the proper format as I have made mistakes of transferring on the different chains by accident.
Also, each different chain uses different tokens as gas fees similar to how we have transaction fees for our bank transactions.
Ethereum uses ETH as their gas fees.
Binance uses BNB as their gas fees.
Finding a Defi Platform
Once you have connected and transferred your crypto to the specific wallet, it is time to find for a Platform to either Farm, Liquidity Mining or even enroll for a lottery maybe? :)
Total Value Locked (TVL) What it means?
I wanted to bring to your attention on the data above to show a comparison of the Binance ecosystem(Left) and Ethereum ecosystem(Right). As you can see that the Ethereum value locked is almost 4x bigger than the Binance ecosystem. Bear in mind that the Binance Defi came about not too long ago less than 2 years while Ethereum has been in the space for more than 5 years. It is mainly due to the high gas congestion fees on the Ethereum network which caused many people to look for alternative to perform defi transaction. Whose the next best alternatives ? Binance. So Binance fees which uses BNB token barely costs more than a dollar for their transaction fees. Although there are arguments in place about Binance being centralized, the huge numbers and market cap here shows that almost 20% of them prefer lower cost with some form of centralization.
The total value locked here means people like you and me have locked up (can be withdrawn) their crypto amounting to this amount to earn yields either through farming, staking, or liquidity mining.
I always view that the Ethereum network as for the ‘Apple’ equivalent and Binance as the ‘Samsung’ as a brand comparisons.
Methods of Earning from Defi
So there are a few methods of making money in the Defi Space that I will breakdown below here.
Staking — Putting a single crypto to earn the some crypto (Usually the farm’s own token)
To me this is by far the safest way to earn and farm for yield besides the token reducing in price. This is somewhat similar to the Staking or Flexi Savings type in Binance in one of my previous video that I’ve done here.
Depending on which platform you use, most of the time they will allow you to Stake other tokens or their own tokens to earn interest.
Using PancakeSwap, they are called “Syrup Pool”
From the above example, you can see that I have staked 35.914 CAKE tokens and it is earning the exact same token worth 0.639 CAKE token.
Bear in mind that for each action that you perform, it will costs gas fees which is Pancake swap is charged in BNB from Swapping token, Harvest, Compound, Approve Cake.
However over the long run that gas fees is very small ranging from $0.15-$3 depending on the traffic but it is still way lower than the ETH gas fees ranging from $30-$200 or more!
Below are some of the resources you can use to estimate how much you can earn per day based on the tokens you put in the Pools.
It looks something like the below.
I personally also use the below resource to calculate what is the optimal amount of cake before compounding my rewards to save on the small gas fees.
Calculator for Returns for Pools : https://bsctools.xyz/pancakeswap/pools/
How often need to compound your Cake : http://cakecalc.herokuapp.com/#/
To me, I still feel that PancakeSwap is the most trustworthy and their community and support behind them is tremendous. I still do not see other Yieldfarms out there that prepare calculator tools compared to Pancakeswap.
One where some say that it is an equivalent of Uniswap + Sushiswap in the Binance ecosystem.
Stake in Liquidity Pools (LP) “Liquidity Mining”
This is the section whereby a lot of people gets confused and interested in as the APY returns are sky high for some of the new ones that are initially launched to promote liquidity on their new token or platform.
How does Liquidity Pool work?
First you would need to have 50:50 ratio of the 2 token you would like to participate in.
As a general rule of thumb Cake-BNB, Cake-WBNB seems relatively save based on my research as their prices is almost near identical but still I am more inclined to go to single token staking instead.
Pros of Staking in LP : Sharing of fees swapping, increase in combined LP token value
Cons : Impairment Loss, decrease in LP token value
If you do not have them, you can do it at their Exchanges to obtain 50/50 in value of the 2 tokens.
Example you want to get in Cake-BNB and you do not have enough Cake.
You can do it at their Exchange for a small minor fee and minor price impact.
Once you have for example $50 Cake value and $50 BNB, you can proceed to create a combined liquidity tab as per below.
Make sure that you have your calculator ready to calculate how it is worth so you have equal parts.
Once you have completed it, you can add liquidity and obtain a Cake-BNB LP token.
Once you have obtain the Cake-BNB LP token, you can actually go to other yield farms to stake them on it.
As you can see above each of the farms above have different reward and APY%, deposit fees and performance fees as well. Looking at some of the research online, I have concluded that the safest so far is PancakeSwap, Autofarm so far and am currently testing out with Jetfuel only for the Liquidity Mining.
There are many resources you can utilize to search for those Liquidity Pools with high APY however be vary of the projects to understand their risks which I will explain later on.
You can browse through some of the resources below to make comparisons of the platform yield to either look for new ones.
farm.army — Farm & Liquidity Pools — Binance Chain
Track your farming and pool performance on the Binance Chain with farm army
Current Crypto DeFi Yield Farming Rankings | CoinMarketCap
See today’s DeFi yield farming rankings ✔️ Listed by total value locked in ✔️ Curve ✔️ Yearn ✔️ Ethereum based tokens…
Bsc Yield Farms | BscScan
Disclaimer — The Sponsored/Promoted Links displayed on BscScan are NOT an endorsement of the product, service or…
Based on me testing out the platforms I realize that Liquidity mining is not entirely for me as it involves adaptability and a lot of research to ensure the rewards justify the risks.
To me, I would rather stake tokens that I have been holding instead for safer returns. If there is a farm that offers up free rewards for lets say DOT tokens that I have to earn free tokens, I would consider so long that the platform is trustworthy by checking their website, reddit, telegram, twitter to see if there’s any negative sentiment and their FAQ sections for the costs and fees involved as well. Because there are instances whereby the Farms may be ‘rug & pull’ which means being scammed and all the tokens will either be stolen or have no value.
Also as the amount of people increases in the same liquidity pool or farm, the returns will reduce as the rewards are being shared with more parties. Don’t forget about the cost incurred to transfer the tokens from your exchange, to your wallet, to exchange the tokens, to approve the tokens, impairment loss, withdrawal fees as well as performance fees. At the end of the day, perhaps just HODL-ing and looking for altcoin gems might be an easier way to increase your portfolio value overtime.
Hopefully you learnt something from Yield farming.
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Disclaimer: This is not financial advice. Please do your own research. As Crypto is a highly risky and volatile instrument of investment the risk and reward is different for everyone. Invest at your own risk and only what you CAN AFFORD to lose.