Yield farming was likely the greatest driver of the decentralized finance (DeFi) explosion in 2020. Risk-tolerant investors saw the potential of yield farming and jumped at the chance to earn “free” interest with their cryptocurrencies. It isn’t exactly free, however, and the gains come with significant risk, depending on the project. While many farms are only profitable for a few weeks, we’ve compiled a list of the best yield farms for longer term fee-earning.
The strategy uses the innovative technology of smart contracts, which in essence are automatically executing coded contracts that run on blockchains like Ethereum. Yield farming has grown as an investment strategy along with the technology that enables it. It can be risky, and scams are still part of the ecosystem, but the best platforms already have proven their worth.
What is Yield Farming?
Yield farming is the popular strategy DeFi users take advantage of to put their cryptocurrencies to work to earn high interest. According to DeFiPulse, a DeFi analytics and ranking platform, DeFi protocols have over $50 billion worth of cryptocurrency locked in these programs. There are multiple types of yield farming projects offering different financial services, mostly to earn astonishingly high interest. Large banks might earn you 0.01% to 0.25% a year, but these sub-percent yields can’t compete with the 20% to 200% earnings some DeFi platforms tout. Often, the higher the interest, the riskier the staking