In a friendly tone: With the rise of crypto, we’ve seen plenty of different ways to make money in the space. Some people prefer to mine, others like to hodl. But there’s also a third option that a lot of people don’t realize exists: yield farming.
What is Yield Farming?
Yield farming is a relatively new investing strategy that has emerged in the age of crypto assets. In yield farming, an investor stakes his or her cryptocurrency holdings on a platform.Then receives returns based on how much those staked assets earn during a specified period of time.
Yield farming is similar to traditional lending and borrowing, which has been around for thousands of years. But where traditional lending and borrowing is done with fiat currency, yield farming uses digital currency to generate returns for investors.
As you might have guessed from the name, this investing strategy involves farming—specifically, the growth of crypto assets by way of staking them on a platform. The process starts by depositing funds into the platform, which are then divided into “shares.”
If you’ve got cryptocurrency holdings and would like to generate extra income from them, yield-farming might be the answer for you. Yield-farming is a process in which an investor buys lots of assets that generate a passive return, such as BTS, STEEM or SWEAT/USDT, and then sells them at regular intervals for profit.
Yield Farming Players
Yield farming is an investment strategy involving staking or lending cryptocurrency tokens to generate returns. It involves three players:
1) The investor: This is the person who owns the tokens that they want to rent out to yield farmers.
2) The lender: This is the person who agrees to stake or lend the tokens to a yield farmer in exchange for interest (or another form of compensation).
3) The borrower/yield farmer: This is the person who borrows the tokens from a lender, with the intention of generating returns by selling them at a higher price than what they were purchased for.
How Does It Work?
Yield farmers were usually people who were involved in cryptocurrency in some other capacity. They were miners, traders, or holders of some amount of cryptocurrency. They would mine new coins or manage their trade for long periods at a time.
In essence, they would work hard to accumulate crypto and then simply let it sit there and gather interest (or “yield”). The idea was that if you could collect enough coins by working hard at one thing or another, you could start to collect interest on those coins without putting in any additional work.
This kind of activity is also known as ‘passive income’—earning an income without doing any work once your initial investment has been made. In this particular case, yield farming relied on the rising value of cryptocurrencies over time to provide the interest rate that would make all this possible. This kind of passive income is not uncommon elsewhere; it’s how a lot of real estate investors make money.
It can sound a little bit confusing at first but yield farming is in many ways just like investing in property, except that instead of buying one property and waiting to sell it after a while, you buy multiple different coins and hold them until they grow enough to pay off what you spent on them with interest.
Terra Luna is a new crypto yielding asset using blockchain. It is a coin that pays dividends and can be staked to receive rewards based on a percentage of the overall network yield.You can buy the starter packs for Terra Luna for $0.99 – $4.99. The Terra Luna price depends on the pack you purchase.
It’s not that difficult to learn how big gains are coming from though, all you need to do is look at how much daily interest each coin gives you. This is why yield farming works best with coins that have high daily gains and low daily volume because then there will be more coins available for you to buy so you can earn more interest with each coin.
Types Of Yield Farming
Typically, yield farmers (who are also known as hodlers) will loan their crypto to margin traders at a significant interest rate. This practice is known as interest on loan (IOL). The margin trader can then use the cryptocurrency to trade other assets or increase their position in a particular asset.
The yield farmer earns the interest on the loan and whatever profit is made from the increased position. There are a few different ways to lend; below we will go over each one with an example.
In simple terms, this is when you loan your cryptocurrency to someone for an extremely long period of time.
Leasing is a new way to earn passive income with crypto-currencies. You lease your coins to someone else and they pay you back at higher than average prices. It is an option for buyers of crypto coins to get the best prices at all times.It is a great way to earn passive profit while not having to hold onto your coins.
In crypto, you can achieve this same kind of yield growth by lending out your assets to others via a smart contract platform like Ethereum. Through their use of your assets, you earn interest on their behalf. Typically, you will receive payments in the form of a stable coin or cryptocurrency that can then be sold off at a later date when prices are higher.
The idea of renting out your coins might seem a bit strange at first, but it’s actually a smart way to use your crypto assets. Especially if you’re a long-term holder who is looking for a way to earn interest on your holdings. You can rent out different parts of your portfolio and let someone else take the risk of price fluctuation.
All you need to do is sign up on an online exchange and add coins to your wallet address. Then you can put them up for rent and set the amount of money you want to receive in return daily, weekly or monthly. Some exchanges will even reimburse you in fiat currency once the week or month is over.