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The curious case of yield farming [Part 2]

THE CURIOUS CASE OF YIELD FARMING [Part 2]

THE CURIOUS CASE OF YIELD FARMING

[Part 2]

All About Staking & Farming

Alrighty…

Let’s continue our Yield Farming investigation!

In our previous article (“The Curious Case of Yield Farming Part 1”) we have reviewed the PancakeSwap DeFi exchange on the Binance Smart Chain network, and now we will also take a look at the Uniswap exchange located on the Ethereum network, as well as other Yield Farming platforms.

Overview Window

Uniswap Exchange
Overview Window

Disclaimer: 

We have no intentions to agitate you to buy a particular cryptocurrency or give any financial recommendations whatsoever, thus the content of this article should not be taken as financial advice, for it serves only information purposes. 

We just look for promising projects that we like ourselves, and in the end, we structure all the carefully collected information for you, so that it is easier for you to make your own informed decision. Investments should always be carried out with an eye to capital growth in the future.

So, Uniswap works on the Ethereum network, which means high fees and potentially it is extremely unprofitable, because one reinvestment can cost around $ 30-100 (depending on the network congestion), and, accordingly, investing and picking up your assets will cost about the same amount as we pay for any transaction on the network.

As we mentioned earlier, it will be profitable to farm on the Ethereum network if your deposit consists of a 5-digit number, so that your earnings exceed the fees for gas commissions on the network at times.

Various Farming Options

Uniswap Exchange
Various Farming Options

In general, there are two huge advantages to the Uniswap platform.

The first is that, of course, there are certain tokens here that are not traded on other blockchains or are not listed on other exchanges. That is, we can trade these exclusive tokens either on Uniswap or on some other related platforms located on the Ethereum network (for example, SushiSwap).

The second bonus is that with the release of the new version of Uniswap v3, there was such a thing as “concentrated liquidity”.

“Concentrated liquidity” is a concept that will help us establish the range of where our assets will be traded. On the chart, we can see the most popular trading range (from where and to where the token price came) and where the trades took place during the specified time period.

“Concentrated liquidity” in a nutshell

“Concentrated liquidity” in a nutshell

Thus, we can adjust the range of our trades, that is, if the price goes outside the range we have set, we will not have liquidity here. 

That is, all liquidity will be directed precisely at this particular period, which means that our liquidity (our money) will be used more often.

Imagine that someone’s funds are distributed in such a way that part of the funds is distributed at one price point, and part is distributed at other price points (that is, they do not move, as they are in reserve).

However, with the help of the setting, we can set a narrow trading range, due to which our liquidity will be used only in the range where the highest trading intensity occurs, which means that most of the liquidity allocated by us will be used.

All the liquidity will be “concentrated” within the price range we’ve adjusted

All the liquidity will be “concentrated” within the price range we’ve adjusted

This means both a higher return and an increased risk of impermanent loss.

Here is a website that will help you calculate in real-time how much income you will receive when setting a particular price range for farming.

https://uniswapv3.flipsidecrypto.com/

This website is quite intuitive, but we will show you briefly how to use it.

“Concentrated liquidity” set up

“Concentrated liquidity” set up

Let’s say your deposit is $ 5,000 (you want to send this amount to farming), on the left, you select the pool where you want to farm this amount, in the “Investments” window, indicate the amount of the deposit, and your approximate annual profitability will be indicated in the window on the right.

That is, in this case, we see that here the annual return (excluding reinvestment) will be approximately 163 percent, and at the same time, our liquidity is distributed over the entire possible price scale.

In the “Liquidity Bounds” section, we can adjust our liquidity range, that is, tell the system from where and to where we want our token to be traded.

After setting this range, the website will generate for us the annual profitability that we will receive, taking into account the range of liquidity we have set.

Even though the annual profitability has increased, do not forget that the impermanent loss has also increased, since the price of the token will be subject to large changes (taking into account our assets).

Thus, using such a manual setting, you can influence the annual profitability in the selected pool by manually specifying the liquidity range within which the token will be traded (which will also entail an increase in the impermanent loss). This suggests that the profitability indicated next to the name of each pool is not a constant value and can also be adjusted depending on the selected parameters.

Next, we'll take a quick look at the YearnFinance platform.

https://yearn.finance/vaults/

This site has a decentralized mechanism for “optimizing the provision of liquidity”.

Yearn Finance

Yearn Finance

Sounds fancy, ain’t it?

To avoid using 10-dollar words, this means that we invest our funds through the smart contract of this platform, and then it manages these funds for us.

At the same time, no trading takes place on the platform, the platform simply monitors various decentralized exchanges and various liquidity pools, and in the case of a profitable option, automatically “redirects” our funds to the most profitable liquidity pool at the moment.

If we want to farm some kind of cryptocurrency, then we can simply deposit our funds on this platform, then, in accordance with the platform’s smart contract, our funds will go to the YearnFinance platform, which will automatically look for higher profitability for us.

Yearn Finance various farming options

Yearn Finance various farming options

As a rule, stable coin liquidity pairs are mainly represented on this platform, which means low profitability with minimal risks.

So, here we send our assets and then a smart contract is in control of our assets (which is very important, since in this case the human factor is completely excluded). Further, the smart contract determines which liquidity pools are generally available on a particular platform, and distributes our funds to the most profitable of them.

The profitability ranges from 6 to 15-20 percent per annum, that is, if you are interested in high profitability, then YearnFinance will not suit you.

Yearn Finance

Yearn Finance

In fact, this service is engaged in the optimization of your assets, redistributing funds according to the algorithms and codes prescribed in the platform’s smart contract. 

This platform is designed to automate the process of finding the most profitable farming offers so that you do not have to manually transfer your funds from one pool to another, doing constant monitoring.

Of course, for the cryptocurrency market and decentralized platforms, such small profitability (which is explained by liquidity pairs on stable coins) will seem frivolous, but if your goal mainly comes down to saving your funds, while earning a little, but with less risk – then this may still prove itself as a quite good trading strategy.

Nominex Exchange

Nominex Exchange

The next platform on which we can farm is the Nominex exchange, which is on the market quite recently, but already has a partnership with Binance and has established itself as a stable farming platform.

At the very beginning of the launch, the platform would give about 1000 percent (or more) per annum (at that time), however, of course, with the arrival of a large number of new people on the platform, the percentage of profitability dropped significantly and now it is hanging on at around 240-250 percent per annum (however, it should be recalled that that APY means “including reinvestment”. 

If we exclude reinvestment, the percentage per annum is about 100-150 percent).

Nominex was created/founded by Russian developers team

Nominex was created/founded by Russian developers team and since then the project has proved itself as a very stable platform (especially during market downfall in May 2021)

That is, the platform has become more popular, accordingly, more people came here to farm (while sharing the same pool), the risks have dropped because the platform has established itself as a cool investment tool.

Of course, all this also led to a decrease in profitability, but it still shows quite an impressive number. In addition to personal farming, the platform also has bonus farming, where we can receive additional assets on the condition that we simply farm our tokens for a long period without “withdrawing” them from the pool.

Nominex “Stake Together” Option

Nominex “Stake Together” Option

Nominex also offers team farming, but it will be of interest primarily to those who have the opportunity to further develop a large referral team. 

Think bloggers/influencers with a huge following.

By the way, if you are particularly interested in the Nominex platform, we can write a detailed article with an overview of this farming platform, we will tell you exactly how you can earn there and how and what coin pair you need to invest in the liquidity pool (spoiler alert: NMX-USDT).

Nominex and Binance partnership

Nominex and Binance partnership

By the way, recently Nominex entered into a partnership with the world’s largest crypto exchange Binance, becoming a member of their brokerage program (basically, they’ve become Binance official broker). 

We believe that this is a very reasonable decision made by the Nominex administration, since this allows them to get a number of advantages of the Binance platform, while maintaining their independence as a separate farming exchange.

In particular, Nominex tokens are not listed on Binance, because this was not part of the agreement and was not the goal of Nominex admins as well.

They needed to get attention from crypto traders who would switch to the platform from Binance (given that Nominex is now an official Binance broker, you can trade on Binance through Nominex) and thereby automatically raise (or at least support) the Nominex assets, which is the NMX token price.

Roll Safe

A win-win strategy, given that Binance now has most of the liquidity in the cryptocurrency market in its hands, considering how many potential traders come to the exchange every day.

Maybe that explains the price of the token hanging on within the 3-6 USD range and never falling down? And check out their APY, the interest rate never goes lower than 230%. 

And what do you make out of that? Have any experience farming on the Nominex Exchange? 

In case you have anything to share, tell us your feedback in the comments section. 

As for the profitability, on average (as we have already mentioned) it is about 100-150 percent per annum. Lower than high volatility pairs, higher than when farming with stable coins.

Nominex somehow manages to correctly balance between sufficiently high profitability and relatively low volatility of the token price, because during the recent market fall (on the last price fall occurred in May), when the entire market (including Bitcoin) fell by several positions, only Nominex kept its positions and practically did not change either in price or in the profitability of the farming, which clearly speaks in favor of the reliability of this farming platform.

Some of the most profitable pools with crazy APYs

Some of the most profitable pools with crazy APYs
Those figures are insane

Next, we will consider highly profitable, short-term farming on so-called “one-time” farming platforms (with a lifespan of no more than a couple of months). 

We will not give examples of such platforms, since, by the time this article is published, many of them will no longer be relevant.

So, what is the essence of making money on such farming platforms? Well…It all comes down to a bit of luck mixed with a little bit of research. You need to find such a highly profitable farming platform and be among the first lucky investors by investing your assets in a liquidity pool or buying their tokens.

Such one-day farming platforms usually come out every single day, that is, literally two or three such platforms can be found if you search well.

As soon as they are launched, the initial profitability can range from several hundred to tens of thousands of percent per annum – such ultra-high profitability is explained by the fact that initially there are no people on the platform and no one is farming coins in the pool.

Accordingly, with the arrival of people, this profitability gradually decreases, since there is also an impressive amount of trades there.

And as people buy their token through the platform’s liquidity pool, they put it back into the liquidity pool, which leads to a lower interest rate as more competition forms (more people who want to take that same income for themselves).

High-Profitable (& High Risk) Pools

High-Profitable (& High Risk) Pools

If you are lucky enough to find one of these ultra-profitable farming platforms among the first lucky ones (that is, literally in the first few minutes or hours of the project’s life), then you can potentially earn just crazy profitability.

And of course, as new people continue to come to the project after you, income will drop significantly (up to large drops in profitability by several tens of thousands of percent per annum).

At the very beginning of its launch, Biswap would also show such crazy APRs as well..

At the very beginning of its launch, Biswap would also show such crazy APRs as well.. Those of you who got lucky...well...you got lucky. Just a couple days later it had dropped to a couple thousand APRs.

Within a few hours, the pool may already be 10,000 percent per annum (even if initially it was about 100 000), in a few days, there will be about several thousand percent per annum (which is still a crazy figure!).

And accordingly, as new investors come to the project, in the end, the profitability in the pool will shrink to more or less standard 100-200 percent per annum.

Where to look for such ultra-profitable farming platforms?

There are a huge number of different specialized Telegram channels and chats (there are both paid Telegram channels and free ones), we will not recommend them in this article, so you will have to conduct your own “crypto” investigation.

However, we will recommend some websites for searching and analyzing various farming platforms. 

https://rugdoc.io/chain/bsc/

On this platform you can search and analyze various farming options for yourself.

On this platform you can search and analyze various farming options for yourself. You can also search by different blockchains (for example, here are BSC Farms are shown)

On this site, a team of professionals analyzes and conducts an audit of all new farming platforms, assessing potential risks, vulnerabilities in smart contracts, etc. 

Also, in addition to the risk, they indicate the network of a particular farming platform on which it operates, and, interestingly, they often analyze those platforms even before they are launched. 

That is, in the case of a potentially profitable (and not a scam) platform, you will have a lot of time to prepare to be one of the first to enter the long-awaited project.

RugDoc Platform

RugDoc Platform

Since such farming platforms are associated with high risks, we need to discuss necessary precautions with you when choosing such projects.

First, it is important to assess potential profitability in advance. It is profitable to enter such projects if the profitability is measured by a 5-digit number, because if the profitability is “standard” – what prevents you from continuing to farm on your already chosen trusted farming platforms? 

On ultra-profitable farming platforms, as a rule, the platform’s native token is used for staking, which usually doesn’t have any real value behind it.

CoinGecko may also serve as a good “profitable farming option - search engine” as well

CoinGecko may also serve as a good “profitable farming option - search engine” as well

Its price is based solely on people’s faith in this token – a lot of enthusiastic investors buy this token, while someone else sells this token to them (at the very beginning of the project, the platform administrators do this themselves).

And as this reward (in the form of a token) is issued to people, the seller’s power by far exceeds the purchasing power, and accordingly, this token continues to fall in value. 

Do not forget that when you farm the platform’s native token, this token (at the time of farming) is in the liquidity pool, so when we finally withdraw it from the platform, this token may not be worth anything at this point.

Curve Finance

Curve Finance

Therefore, the optimal strategy would be to farm for a short period of time – a few days or weeks tops, depending on the expected life expectancy of the project. 

The most important thing is to exit the project on time, taking all the accumulated profit, since as a rule in such projects, the price of the token (and in general the entire tokenomics of the project) is initially designed for the steady downward movement of the price of the token.

Also, do not forget about the notorious “human factor”. Even without all the tokenomics behind the curtains of the project, all such platforms may well turn out to be an ordinary… scam, because the developers are, you know, also people, and their intentions may be impure.

Beware of Crypto Scammers!

Beware of Crypto Scammers!
They’re everywhere!

Unfortunately, it is extremely difficult (and often impossible) to recognize at the initial stage of the project whether the project will turn out to be a scam or not, therefore the basic rule is not to enter such projects with the entire amount of your deposit, only with a small part of those funds that you are not afraid to lose and willing to risk for the sake of potentially high profits.

You may ask...

How can a scam be technically implemented?

There is such a phenomenon as “Rug Pull”. 

schedule

This means that we have a certain pool of liquidity (where our tokens are farmed), however, the project’s smart contract states that a certain wallet (the wallet of the project administrators) can simply take all the money from this liquidity pool and transfer it to that wallet.

Thus, the price of the token will instantly depreciate and all contributors are left with nothing, and the project administrators leave with all the money in their wallets. 

This is a fairly common practice.

Blockchain projects are a relatively young industry, so you should be prepared for local crypto scammers to appear on the scene from time to time.

Been There Nuff Said...

Been There
Nuff Said...

In general, technically, absolutely anything can be put in a smart contract. Up to the point that developers can write off some tokens from the liquidity pool, or print tokens on their own and thereby directly affect the price of the coin and leave themselves the opportunity for other similar manipulations with the price of their token.

Scam coin

Accordingly, you need to be ready for all this and invest wisely, in no case investing your entire deposit. 

Of course, it is also important to watch the analytics of professionals who are familiar with the work of smart contracts (for example, using the platform that we mentioned earlier) and an additional sign of quality is when the professional audit is carried out (as is the case with the Biswap platform, which we wrote about earlier).

Earning money on such platforms is possible, however, due to the over-saturation of such projects on the market (literally several of ‘em appear every single day) and the high risk associated with them, we would not consider it as the main way of earning money.

A good, old “risk management” for today - keeps scammers away!

A good, old “risk management” for today - keeps scammers away!

In addition, the possibility of earning on a particular platform largely depends on your luck and the project you have chosen. Provided a well-written smart contract (without any vulnerabilities that allow developers to scam the project) and timely entry into the platform, you can take very high profits literally on the spot, sometimes within a couple of hours from the moment the project is launched.

However, the prospect of losing your entire deposit is also quite real. Therefore, even if you have already entered such projects, do not forget to take your profit as well.

In a nutshell… Don't be greedy!

Alrighty, this is all that we wanted to share with you today, dear readers. We told you about the possibilities of farming, and shared our opinion on several popular DeFi farming/staking platforms (both on the Binance Smart Chain network and the Ethereum network).

Of course, the topic of farming and staking in the decentralized cryptocurrency sector is extremely extensive and if we set out to cover all the nuances associated with this topic, we could prepare articles for a month in advance.

However, there wasn’t such a goal, we just wanted to smoothly introduce you to the topic of farming, so that if you find yourselves in need to clarify a thing or two, you can always open up this article and brush up on the very basics, so that you have, so to speak, a kind of “reference point” for further immersion in DeFi world.

DEFI

So, as a result:

We briefly touched on the topic of decentralized finance, talked about the methods of farming and what opportunities this or that type of farming provides. 

We clarified the difference between farming and staking, talked about the most popular platforms out there, and talked about the methods of risk management when choosing ultra-profitable farming projects.

If you are interested in the world of DeFi, we will keep you further updated on various ways to make money and a variety of functions (for example, there is the possibility of “landing” cryptocurrency assets secured by collateral), which are provided by said platforms.

Nice, profitable farming to y’all!

gardener

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