Hi and welcome to this 'Top Best High/Low Risk Yield Farms To Invest in 2022-2027' course with us Top Things To Know.
Landing on our course page means you are in the right place at the right time. The continuous novel coronavirus outbreak in 2020-2022, the money printing, the rising inflation rates, the new all time high real estate global prices, and the "new" work from home environment are only some of the reasons why Wall Street and retail investors are hedging their money in Bitcoin and other cryptocurrencies.
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Yield farming is a cryptocurrency investment strategy that holds out the hope of bigger returns than most conventional investments are offering these days.
Yield farming is the practice of staking or lending crypto assets in order to generate high returns or rewards in the form of additional cryptocurrency. This innovative yet risky and volatile application of decentralized finance (DeFi) has skyrocketed in popularity recently thanks to further innovations like liquidity mining. Yield farming is currently the biggest growth driver of the still-nascent DeFi sector, helping it to balloon from a market cap of $500 million to $10 billion in 2020.
In short, yield farming protocols incentivize liquidity providers (LP) to stake or lock up their crypto assets in a smart contract-based liquidity pool. These incentives can be a percentage of transaction fees, interest from lenders or a governance token (see liquidity mining below). These returns are expressed as an annual percentage yield (APY). As more investors add funds to the related liquidity pool, the value of the issued returns decrease accordingly.
Yield farmers, and most protocols and platforms, calculate the estimated returns in terms of annual percentage yield (APY). APY is the rate of return gained over the course of a year on a specific investment. Compounding interest, which is computed on a regular basis and applied to the amount, is factored into the APY.
The Risks of Yield Farming
Yield farming can be incredibly complex and carries significant financial risk for both borrowers and lenders. It is usually subject to high Ethereum gas fees, and only worthwhile if thousands of dollars are provided as capital. Users also run further risks of impermanent loss and price slippage when markets are volatile.
Most notably though, yield farming is susceptible to hacks and fraud due to possible vulnerabilities in the protocols’ smart contracts. These coding bugs can happen due to the fierce competition between protocols, where time is of the essence and new contracts and features are often unaudited or even copied from predecessors or competitors.
DeFi protocols are permissionless and dependent on several applications in order to function seamlessly. If any of these underlying applications are exploited or don’t work as intended, it may impact this whole ecosystem of applications and result in the permanent loss of investor funds.
As blockchain is immutable by nature, most often DeFi losses are permanent and cannot be undone. It is therefore advised that users really familiarize themselves with the risks of yield farming and conduct their own research.
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DISCLAIMER: The content of our course and lectures is intended FOR GENERAL INFORMATION PURPOSES not financial advice. The information contained herein is for educational informational purposes only. Nothing herein shall be construed to be financial, legal or tax advice. The content of this course is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Purchasing cryptocurrencies poses considerable risk of loss. The speaker does not guarantee any particular outcome. Past performance does not indicate future results.