DeFi Yield Farming — Revolutionizing the DeFi Space
With impressive technology and the latest innovations, the DeFi landscape is moving towards a decentralized future with lightning speed. One of the critical reasons for this unprecedented boom is the heavy investment by yield farmers. According to DeFi Pulse, $13.64 billion is the total value locked in DeFi. As DeFi continues to evolve, DeFi aggregators are emerging as a strong trend. By providing multiple earning opportunities and the highest possible yield, they are gaining popularity among yield farmers.
What is yield farming?
Yield farming also called liquidity mining, is a way to earn rewards and returns by holding cryptocurrency with the help of permissionless liquidity protocols. By locking up your cryptocurrency, anyone can earn a passive income. Currently, the majority of yield farming activities happen on Ethereum. However, due to scalability issues and high gas fees, this might change in the future. Cross-chain bridges can allow DeFi platforms to become blockchain agnostic, ultimately, benefitting the yield farmers.
Yield farming involves liquidity providers and liquidity pools. Liquidity providers put their funds in liquidity pools. As liquidity protocols give more and more rewards, yield farmers keep jumping from one protocol to another in order to maximize their returns. This in turn, increases the overall liquidity and increases the token value of these protocols rapidly. Different DeFi protocols take different approaches to yield farming, depending on the exact goals they aim to achieve.
The easy user interface is the crucial feature of any protocol. In the end, any protocol aims to remove the complexities faced by mass users and provide them a platform that is convenient to use.
Let’s look at the top yield farming protocols existing in the DeFi market -
MakerDAO
Currently, MakerDAO is the most popular yield farming protocol on Ethereum. The total value locked is $2.41 billion. MakerDAO is a decentralized credit platform on Ethereum that supports Dai, a stablecoin whose value is pegged to USD. Anyone can use Maker to open a vault, lock in collateral such as ETH or BAT, and generate Dai as a debt against that collateral.
Compound
The yield Farming boom began with the success of Compound. Compound is an algorithmic, autonomous interest rate protocol, allowing users & applications to earn interest or borrow Ethereum assets frictionlessly. In each market, Interest rates are determined algorithmically (based on supply and demand), and interest accrues every Ethereum block. Currently, Compound has the third-highest total value locked, $1.52 billion.
Aave
Aave is an open-source and non-custodial protocol enabling the creation of money markets. Users can earn interest on deposits and borrow assets. All deposits in Aave Protocol have a corresponding “aToken”.
These aTokens accrue interest in real-time directly in your wallet. Aave also allows other more advanced functionality, such as flash loans.
Yield Farming aggregators to Watch Out For
The DeFi landscape is transforming rapidly. Therefore, it is imperative to stay updated with the latest innovations to book more profits. Many yield farming protocols have been launched in the past year. However, only a few have the potential to outperform and benefit the yield farmers exponentially. We conducted meticulous research and looked at various such protocols in detail. Interestingly, these two protocols stand out among the crowd -
Reef Finance
By launching the first cross-chain DeFi operating system built on Polkadot, Reef finance has achieved a milestone in the DeFi landscape. This innovation will open up doors of unlimited opportunities for yield farmers. With high gas fees and network congestion, Ethereum is no longer the only money magnet. However, due to high liquidity, one cannot completely ignore the blockchain as well. Thus, the Cross-chain DeFi protocol is an ideal solution, increasing manifold possibilities for yield farmers.
With a seamless user interface, Reef offers its users a smart liquidity aggregator and yield engine that enables trading with access to liquidity from both CEXes and DEXes while offering smart lending, borrowing, staking, mining through AI-driven personalized Reef Yield Engine. Reef is a user-friendly platform providing ease of on-boarding and maximum profitability for its users.
Slowly and steadily, Reef Finance is gaining traction in the DeFi ecosystem. The platform has recently closed a $3.9 million seed funding round for its cross-chain suite of DeFi services. Last month, they also partnered with some of the cryptocurrency industry pioneers like Chainlink, Bifrost, Bluzelle, Crust, Darwania, Covalent, Aleph, and many more.
To know more, visit — https://reef.finance
Yearn Finance
Yearn Finance is one of the most popular DeFi yield aggregators. It is a decentralized ecosystem of aggregators that utilize lending services such as Aave, Compound, Dydx, and Fulcrum to optimize token lending. The protocol has a native cryptocurrency token called YFI. A yield farmer has to stake the Yearn Finance asset pool assets to earn the YFI token. The first Yearn product was a lending aggregator. After its success, the platform has launched multiple products to simplify DeFi investments and provide liquidity. Yearn Finance has vaults. Vaults are capital pools that automatically generate yield based on opportunities present in the market and provide a passive-investing strategy.
Another innovative product by Yearn Finance is Zap. It is a tool that enables users to swap into and out of several liquidity pools available on Curve Finance and, therefore, multiplying their rewards. Yearn Finance has created its own unique position in the DeFi ecosystem, and it continues to grow rapidly.
To know more, visit — https://yearn.finance/
APY Finance
APY Finance is an automated yield farming aggregator. The APY.Finance smart routing system does not merely optimize for the highest APY. It also adjusts for risk. Every strategy is given a risk score. This fully-community-owned platform provides APY governance tokens to its users and grants them the right to participate in important decisions.
The platform has recently announced the APY LP Reward Program that will reward token holders that provide liquidity via Balancer or Uniswap. Earlier, it also launched the public liquidity mining program and the first version of APY Finance liquidity contract. Right now, they are working towards the alpha launch of the strategy portfolio.
To know more, visit — https://apy.finance
Slick Finance
Slick Finance is an advanced stable coin-based yield-farming protocol that aims to simplify DeFi investments. It offers interoperability across multi-chain, thus, ensuring those yield farmers receive the best possible yields. Another advantage of the protocol is that its stablecoin-based protocol mitigates the risk of base currency fluctuations and thus, avoids an impermanent loss. With scaling and high gas fees issues on Ethereum, Slick Finance will have an early mover advantage.
They will be soon launching their platform. In the coming months, lots of partnerships and other events are scheduled up by the platform.
To know more, visit — https://slick.finance
It would be interesting to see the performance of these protocols in the coming months. The future looks bright!
Conclusion
Even though yield farming is lucrative, one should be careful before investing. Carefully follow and analyze different protocols in the market, and then only, one should invest.
Despite that, DeFi aggregators will play a crucial role in pushing the mainstream adoption of DeFi. By providing the highest possible yields and an unparalleled user experience, they will continue to attract yield farmers, building a strong foundation of a decentralized world.
