Yield farming was the primary force behind the 2020 growth of decentralized finance (DeFi) and a major contributor to all subsequent cryptocurrency pumps. When risk-tolerant investors discovered that yield farming was promising, they leaped at the chance to use their cryptocurrency holdings to earn “free” interest. However, depending on the project, there may be a large risk associated with the rewards, so it’s not quite free. In this article, we’ve compiled a list of the top-yield farms for longer-term income.
DeFi yield farming uses the cutting-edge technology of smart contracts, which are essentially written contracts that operate on Ethereum and other platforms and automatically execute. The technology that makes yield farming possible has led to its growth as an investment strategy. Scams still exist and can be dangerous, but the most reliable platforms have already shown their value.
What is Yield Farming?
Yield farming is the common tactic used by DeFi users to invest in their cryptocurrency portfolios in order to generate high-interest rates. Platforms for yield farming make use of staking smart contracts to give customers interest payments. To create this interest, these platforms employ a variety of techniques, including lending, staking on other platforms, token inflation, creating tokens to be distributed, and many more.
Best Yield Farms To Watch in 2024
1. Uniswap
Uniswap is among the biggest decentralized exchanges (DEX) in terms of total value with more than billions locked in its network under several distinct “versions” that concentrate on distinct tokens like Polygon and ETH. To deliver the service, the platform lets users stake in liquidity pools and utilize thousands of ERC-20 tokens in addition to Ethereum. A portion of trading fees are paid to liquidity providers for each swap, and if a sizable enough principle is deposited, they can also get sizable interest. All other DEXes’ interest rates, including Uniswap’s, are subject to market swings and pool requirements.
When placing funds in pools containing volatile cryptocurrencies, investors should exercise caution as sharp price swings could result in sharp, impermanent losses. Furthermore, just as on all DeFi systems, smart contracts could malfunction and cause significant losses.
2. Aave
Aave was formerly the dominant DeFi company in terms of total value locked, with a startling value of over $10 billion. Since then, it has fallen behind some of the other leading platforms. Aave is a decentralized network that provides low-interest cryptocurrency lending and borrowing on Ethereum (as well as the Polygon sidechain). Aave offers some of the finest borrowed APRs on the market since so many cryptocurrency investors have placed money there to earn interest. You can diversify your assets by borrowing stablecoins (such as DAI, USDC, and USDT) and many others on a variable basis.
3. PancakeSwap
Similar to Uniswap, PancakeSwap operates as a decentralized exchange (DEX). Although it runs on the Binance Smart Chain (BSC) network rather than Ethereum and has a few additional gamification-focused features, it behaves similarly to UNI. It has by far the biggest locked value of any BSC DeFi project.
PancakeSwap carries all of the UNI’s risks, such as the possibility of smart contract failure and impermanent loss from significant price swings. Due to their low market capitalizations, a large number of the tokens in CAKE’s pools are more susceptible to impermanent losses. Although there are more and larger Ethereum-based tokens available to stake on the platform, Uniswap users are still subject to the same risks.
4. Curve Finance
In terms of total value locked, Curve Finance is consistently among the biggest DEX platforms. Plus, using its exclusive market-making algorithm, it makes better use of the locked cash than any other DeFi platform. Both liquidity providers and users performing swaps profit from this.
With decent APRs, Curve offers a lengthy range of stablecoin pools linked to fiat currencies. Curve keeps up strong APRs, which increase to about 25% after starting lower for liquid tokens. As long as the tokens maintain their peg, stablecoin pools are extremely secure. It is possible to fully prevent impermanent loss because their prices won’t fluctuate significantly. The risks of utilizing Curve are the same as those of any DEX: smart contract failure and impermanent loss.
5. Yearn Finance
Yearn Finance (YFI) offers a unique yield farming and aggregation platform, and its dynamic development staff is constantly devising new tactics to increase users’ yields. Moreover, YFI and Curve Finance are closely connected. Investors can deposit one of five distinct cryptocurrencies (ETH, WBTC, DAI, USDT, or USDC) into a smart contract that deposits into the relevant pool on Curve to earn interest. The platform features more than thirty YFI-integrated Curve pools. Gains are multiplied by the smart contract’s reinvestment of earnings in the pool. Yearn is susceptible to the same dangers as other yield-farming systems, including failure of smart contracts and impermanent loss.
Conclusion
The reason yield farming is so popular is that cryptocurrency investors want to earn income while getting exposure to their preferred investments. Rather than letting your money sit in your wallet gathering dust, why not use it for something productive? You can invest this money in safe yield farms and liquidity pools. However, yield-farming platforms do not guarantee the safety of both the principal investment and the profits. Investors have lost hundreds of millions of dollars on their cryptocurrency investments due to smart contract malfunctions, frauds, and impermanent losses. Always research DeFi platforms before making an investment, and be careful of unreasonably high interest estimates.
