Blockchain is swiftly revolutionizing everything around us, especially if we talk in regards to technology. Although, in the context of the Economy, cryptocurrencies have a major influence on our Economy and finance.
Secondly, DeFi technologies are one of the major applications of blockchain technology, which has highly influenced the modern financial system. It has indeed provided innovation and flexibility to the modern finance industry.
Besides this, the thing that is trending in the crypto world and is very popular among Crypto enthusiasts is yield farming platform development. If you are planning to invest in some particular cryptocurrencies, deposit it, and earn profits from it then you must try Yield Farming.
Yield farming is a novel concept based on the DeFi system, and due to its increasing popularity investors now are also seeking DeFi Yield Farming platform development services. In this blog, we will comprehensively discuss DeFi Yield Farming, its working, protocols, and benefits. Let’s, first, try to understand what DeFi Yield farming actually is.
In the simplest terms, Yield farming rewards the user for their cryptocurrency holdings. More elaboratively, the user stakes or lends their crypto assets using the DeFi protocols for which they get returns in the form of interest, incentives, or additional cryptocurrency, and this process is closely related to yield farming platform development. The term ‘Farming’, in Yield Farming, exclusively refers to the high interest which is produced after the liquidity of the DeFi protocols.
Not just rewards, DeFi protocols also issue tokens, which represent the share of the user in the liquidity pool. Both the rewards and the tokens are transferable to other platforms, which further enhances the potential gains.
Overall, DeFi Yield Farming platform development is beneficial to both the lenders as well as the borrowers. If the borrowers are looking for margin trading, they can use the liquidity pool. On the other hand, the lenders can invest their crypto assets in the liquidity pool, and thus can generate a passive income.
Thus, in a DeFi ecosystem, the yield farmers or the lenders are analogous to banks that provide or lend funds in the form of tokens and get maximum returns. The whole Yield farming ecosystem operates using blockchain-based smart contracts which connect the borrowers as well as lenders, while simultaneously using the rewards of the investors.
You must know the following terms while using the yield farming platform development services.
Liquidity Pool:
In technical terms, liquidity pools are managed by smart contracts that actually hold the assets and facilitate their trading as well, using the high liquidity provision.
Liquidity:
Liquidity, as obvious, depicts the conversion of assets into cash. On the transaction of assets, the market becomes competitive.
Liquidity Pool Providers
DeFi Yield Farming platform development would become worthless in absence of liquidity providers. The investors or the users that invest or put their assets in the pool fund are the liquidity providers. Investors are also stated as market makers as they provide the basic amenities that the sellers and buyers are required to trade. However, the assets in a liquidity pool are only lent using smart contracts. In these smart contracts, a seller-buyer agreement is coded and it can only be opened using the DeFi blockchain platform.
There are trustless opportunities for crypto holders to generate a passive income and make high returns through lending their assets using smart contracts in a DeFi application. All the DeFi applications have different characteristics and functionalities, and this uniqueness also determines the way in which the yield farming platform development is done and which platform is used.
The two vital components of Yield farming are liquidity providers and liquidity pools. As we discussed earlier, liquidity providers are the ones who deposit their cryptocurrencies in smart contracts, and liquidity pools is a term used as a synonym for smart contracts. The smart pools works on specialized decentralized exchanges also called Automated Market-Makers (AMM).
The best examples of successful DeFi Yield Farming platform development using smart contracts are platforms like Curve, Uniswap, and Balancer. These platforms enable the traders to swap their tokens by putting one token in the pool and getting back the proportionate amount in the form of other tokens. While doing this, the trader pays a minimal fee in order to complete the transaction, and these transaction fees are deposited to the entire liquidity pool. This transaction fee is actually earned by the liquidity providers. Earning a passive income is the sole purpose of yield farming platform development.
The following is the step-by-step working of the DeFi yield farming.
Thus, using these steps, a more active liquidity pool can generate more revenue for the liquidity providers. Although, the funds are commonly in the form of stablecoins.
Liquidity providers can calculate their returns using the following methods:
Annual Percentage Yield (APY)
As the name suggests, APY means the annual return rate imposed on the borrowers and the return subsequently paid to providers.
Total Value Locked (TVL)
TVL calculates the crypto locked as DeFi lending including other marketplaces. Users can get a complete overview of their performance by calculating the total value of their crypto assets locked on smart contracts on various platforms. This method also helps the participants in analyzing various DeFi platforms and their protocols with respect to their market share.
Annual Percentage Rate (APR)
APR depicts the annual return rate taken from capital borrowers and paid to capital providers.
Returns of DeFi Yield Farming are commonly calculated on annual basis. Also, the Annual Percentage Rate and Annual Percentage Yield, both are vital parameters for calculating returns through yield farming.
APY and APR are different in terms of compounding effects. By compounding we mean the strategy of reinvesting your profits to get maximum returns. All and all, APY can give you an idea of the compounding effect, while APR fails to do so.
One of the best things about DeFi yield farming platform development is that, while simple depositing can provide you annual returns of 10%, the complex trading strategies of yield farming can give you up to 50% annual returns.
DeFi Yield Farming Platform Development provides a lot of benefits. Some of them are the following:
It’s an easy user interface:
Professional crypto investors use a lot of applications to monitor their investments. Such apps are built using user-friendly interfaces so that users can easily check the available projects in which they can stake and select the cryptocurrency amount.
They are easy to start:
Users can easily start Yield Farming as they are highly interoperable DeFi platforms. Users only need Ethereum and Cryptocurrency wallet to start Yield farming.
Profit Potential:
If someone is already depositing cryptocurrencies and those who are depositing cryptocurrencies into protocols for a long time can acquire profitable returns.
The Interoperability of the platform:
The best thing about DeFi platforms is that they are interoperable and versatile. There are also such DeFi platforms that stake the cryptocurrencies and then automatically transfer them to different platforms which provide better investment returns in terms of Yield Farming.
Yield farming has become very popular in a very short period of time. It is now being seen as the most lucrative, and immensely profitable kind of crypto investment as it comes with high liquidity. Because of more adaptation by the users and ease in the regulations regarding the investment strategy, Yield Farming is becoming more prominent every day.
No wonder, the rising popularity and usability of DeFi platforms are also bringing a lot of investors and crypto-asset holders into the DeFi world. As Yield Farming gives high profitable returns, DeFi Yield Farming platform development will provide a lot of profits in the future.
If you are looking for the best DeFi developers, then you can easily rely on Antier Solutions. We have a lot of impeccable experience and guidance in developing amazing DeFi Yield farming platforms and other blockchain-based platforms. Antier solutions will also provide you with the best consultancy and services for all blockchain development projects.
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