2017 could be described as the year of ICOs while 2020 will be remembered for something else: your guess is as good as mine – Covid19 pandemic. But there’s something else that the year will be known for in crypto circles, it is a year of decentralized finance (DeFi).
After projects like Compound blazed the trail in this niche, we have continued to witness an explosion in DeFi-related platforms. With yield farming becoming the in-thing, many are wondering if this is going to be another flash in the pan of digital currency revolution just as witnessed with initial coin offerings.
We checked some of the platforms to find out what’s going on and how much profit investors are making from them. What we found out is quite interesting. There simple are many investors taking advantage of the DeFi success as seen with the COMP token and recently, UniSwap.
The main advantage of yield farming aside the potential profit is that exchanges are taking advantage of it to create a more flexible investment window for users.
Traditionally, yield farming or liquidity farming involves locking up invested funds to create liquidity for the project. Consequently, the value of the DeFi token in question appreciates giving more profit to investors who now seem to be moving from project to project. There are thousands of dollars at stake.
The idea is to enable decentralized trading without the regular order books. The investors are part of the liquidity pools from which orders are filled. They are rewarded with the tokens of the DeFi network.
Investors can invest and exit investment positions whenever they want. Some of the most popular DeFi investments on the platform are:
This has a flexible investment according to OkEx, but is undoubtedly the highest paying DeFi platform. With returns at 38%, liquidity pool is attracting a lot of attention from investors and most likely, regulators down the line. The decentralized exchange is based on Ethereum. It allows non central exchange of tokens between traders. Its recent launch took the DeFi community with the creation of its liquidity pool that enables decentralized p2p trading.
We’re thrilled to announce that UNI, the Uniswap Protocol governance token, is live now on Ethereum mainet!— Uniswap Protocol 🦄 (@UniswapProtocol) September 17, 2020
Ethereum Address: 0x1f9840a85d5af5bf1d1762f925bdaddc4201f984
Another high-yielding DeFi product is Curve, which is currently paying liquidity providers 25.04% net profit calculated through subscription interest and staking returns. YFII is currently paying 17.27% while Compound is paying 0.55%.
Although there is money to be made through joining a liquidity pool, remember that there are risks also. Risks come especially through hacking of platforms and faulty code bases. That’s why we always recommend that you diversify your investments where the hype is ICOs or as presently being witnessed, yield farming.