Yield Farming is a process that allows crypto asset holders to lock up their holdings, which in turn provides them with rewards.
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 pool is. Watch out for scams and unproven platforms that may lose you your money.
Yield Farming on Ethereum vs. Binance Smart Chain
DeFi first erupted onto the cryptocurrency scene on the Ethereum network, but since then it has spread to other blockchains including Binance Smart Chain (BSC). BSC was launched by Binance Exchange in April 2019 to rival Ethereum. The Ethereum network has been struggling with high transaction fees caused by an increase in users and in computation needed to run the staggering number of complex DeFi transactions. BSC is more centralized, which helps speed up transaction processing and dramatically lowers transaction fees compared to its rival. The Ethereum network charges these fees in Ether (ETH), and BSC charges them in Binance Coin (BNB).
The highest value DeFi platforms are on Ethereum (Aave, Curve, Uniswap, etc.), but BSC has enough large projects including PancakeSwap and Venus Protocol to compete with the Ethereum network. Ethereum-based platforms can only use Ether and other tokens built on Ethereum on its network, most of which are called ERC-20 tokens. BSC’s native token is BNB, and its platforms can use other tokens on the network (most called BEP-20 tokens). BSC is still cheaper to send transactions, but at the time of writing, Ethereum gas fees have dropped since DeFi became so popular. Now you can find some of the best yield farms on both chains.
How to Yield Farm
The best yield farms on the market are all pretty easy to use with one minor exception — Uniswap V3. Before you can start earning yield on your cryptos you need to get a software wallet like MetaMask (or a hardware wallet supported by the platform you want to use). The most common way to purchase some cryptocurrency is to sign up for an account on an exchange like Binance, Coinbase, Webull, or Gemini. You also will need to purchase either Ethereum or BNB, depending on which network you plan to use to pay transaction fees.
Once you have some crypto in your exchange account, send it over to your wallet and go to your yield-farming website of choice. Click “Connect Wallet”, and enter your wallet password, find the pool you want to deposit in, and follow the instructions the platform provides. Now you should keep a watchful eye out for major price fluctuations in case it incurs an impermanent loss.
Pro Tip: Use a High-Speed, Anonymous VPN
A VPN lets you securely access the internet in an untraceable way. If you’re a cryptocurrency trader, you may want to remain anonymous or mask your IP address to another location. For trading, in particular, ExpressVPN is the best option on the market. Not only can it automatically connect before you access the internet, but it also offers lightning-fast speeds — something that’s needed to trade in the volatile cryptocurrency markets.