Yield Farming; One Of The Bizarre Money Habits Making Millennials Richer
According to a recent article published by INVESTED WALLET there are 07 popular passive income streams registered, among which interest and dividend income stands out as the most valuable.
Using every waking minute to generate extra revenue is what everyone aspires to achieve. Yield farming is an example of activating your passive income. Investing in yield farming has gained immense popularity in recent years, but it is imperative to inspect each project before pouring huge funds into it.
In an article published by LEARNBYBIT.COM, it is indicated that users who invest in yield farming at an early stage of the project can reap considerable profits.
A yield farming strategy is a perfect example of DEFI that utilizes the concept of eliminating intermediaries for financial transactions and obtaining maximum benefits from them. Yield farming, also referred to as liquidity mining, is a process of putting cryptos to work and earning interest on them. In simpler terms the yield farmers will invest their cryptos in a decentralized network and earn interest over that holding.- Tweet This
In such a decentralized network where other borrowers are ready to take up that money in return of the interest which is ultimately provided to the lenders. By investing this borrowed money in various investment programs, these borrowers can earn high returns and profits that will enable them to cover the interest on the borrowings. This will enable them to maximize the existing investment.
In a study conducted by BUSINESS INSIDER, it was found that smart contracts in yield farming can be risky at times. This is because they can contain bugs or can be hacked easily. It is better to immerse yourself in digging deeper rather than being distracted by lucrative offers.
ADVANTAGES OF INVESTING IN YIELD FARMING:
01 As the project grows in size, the profit ratio will increase, which leads to high returns on the initial investment.
02 Yield farming is the process of lending and borrowing digital assets that offer lucrative deals that eventually maximize the net profit.
03 The more investment you make, the higher the return on investment.
04 A profitable yield farming strategy involves staking currency in a way that retains higher returns.
05 Few Defi markets implement the strategy of over-capitalization on the money being rendered. So, if you want to borrow xyz amount of money you will have to deposit 2x collateral value. That signifies even if in future the borrowers are not able to repay the money the lenders will not have to suffer and the DEFI marketplace will also maintain its exchange balance.
06 Yield farming also offers higher profits than almost any other traditional investment channel.
07 Yield farmers can also turbo-charge their returns with liquidity mining. They receive tokens from the company borrowing their funds, in addition to the high interest on their loan.
A YIELD FARMING STRATEGY INCLUDES 05 METHODS:
01 LIQUIDITY SUPPLIERS:
The idea is for investors to invest a specific amount of their money into a decentralized group that reaps profits from transaction fees collected by verifying a variety of trades.
For instance, if a person holds $1000 in a decentralized network and the full capital is $100k, and the transaction fee is 0.3%, then at the end of the year that person would receive up to $30 as interest.
02 BORROWING AND LENDING:
Lenders who provide capital will receive rewards as interest on their capital. Many platforms offer a return rate of up to 50% to 60% APY and provide the ability to cash it out at any point of time.
On the other hand, borrowers shall take out loans and purchase a few cryptos, which they should then invest on platforms that yield a healthy return.
03 LEVERAGED LENDING:
In this method an investor can lend a particular amount of money in return for interest and other assets and leverage the investment.
04 HOLDING COINS THAT HAVE REDISTRIBUTION FEE:
Holding coins that have a redistribution fee shall entitle the holders of such coins with free fees for every transaction that took place in the platform. This will create a source of passive income without any hustle of holding and trading.
An investor holding the coin “XYZ coin”, which has a transaction fee of 10%, would have 5% burned during the transaction and the rest distributed equally among the holders. In this way, every time you make a transaction, you will earn free fees for holding the XYZ coin token.
05 STAKING PROGRAM:
Staking can be considered as a process to putting your cryptos to work and earning rewards from them. Your crypto assets will be committed towards supporting a blockchain network and confirming transactions which will create an extra income source alongside eliminating the hustle of mining.
CONCLUSION:
The best approach for crypto investors wishing to take advantage of the exceptional revenue potential of yield farming opportunities is to mitigate risk wherever possible. In simpler terms, Yield farming can be considered a very reliable way for generating passive income when utilized strategically. Users must thoroughly examine each aspect of the yield farming project and take into account the risks, even though everything comes with a clause.
CALL TO ACTION:
In case you wish to know more, feel free to visit us at https://citrus.tech/
