The decentralized finance sector or DeFi has grown exponentially over the past 10 years giving rise to several DeFi applications or passive income generators like yield farming or liquidity mining. Thanks to ‘yield farming’, a new concept developed by the distributed finance network that has made lending and borrowing completely decentralized and permissionless with greater returns or interests and the scope to earn COMP tokens or governance tokens. One of the brighter sides of yield farming is that yield farmers can stake stable coins pegged to USD which makes them less volatile in the market. So, how profitable is yield farming? The profitability rate depends on several factors like the amount staked or invested, the staking procedure, liquidity, collateral and risk factors, etc.
Best Liquidity Mining and Yield Farming Platforms
The rising popularity of DeFi applications has paved the way to the growth of a number of yield farming platforms in the decentralized market. Here we have enlisted a list of DeFi exchanges with liquidity mining pools that can multiply rewards and minimize financial risks in the process.
Here is our previous article about Best Defi Coins To Invest In 2021
Built on the Ethereum blockchain, the Uniswap platform is one of the newest and at the same time largest DeFi exchanges for yield farming. Yield farmers can lock and stake their funds here in ETH and USD and earn up to 3% fees on all investments depending on the amount of their share. In 2020, Uniswap launched its own governance token called UNI. As a launching offer, Uniswap promised 400 UNI tokens to its users who will connect their Ethereum wallet to Uniswap before August 2020. Users simply have to log in with their Ethereum wallet and pay the gas fees to earn the free UNI tokens.
Recommended Article: Difference Between Yield Farming vs Crypto Mining, Staking, Liquidity Mining
- Compound Finance
Compound Finance is another popular DeFi exchange platform that operates on the Ethereum blockchain network. Since its inception in June 2020, the platform offers its native token COMP and cToken as rewards that can be utilized for borrowing and lending digital assets. Depending on the value and quality of assets, yield farmers can borrow 50 to 75% of their token value.
Aave is another competitive market player in the DeFi sector that leverages the AMM (automated market makers) smart contracts in a liquidity pool. Like the other exchange platforms, Aave too runs on the Ethereum network that allows yield farmers to borrow, lend, and earn digital rewards in a decentralized network. The borrowing and lending of crypto assets depend on the collateral posted on the platform. Aave allows borrowing and lending of funds in two tokens – aTokens and LEND (AAVE) which is the native token of the Aave platform. Another interesting attraction of the Aave platform is the “Flash loan” that can be issued instantly against upfront collateral paid by the yield farmers.
The Balancer is an AMM platform that operates on the Ethereum blockchain network. Balancer comes with customizable pools like shared pools and private pools to earn rewards. In a shared pool, the fees are fixed whereas, in a private pool, owners have control and can add liquidity as per choice.
- Curve Finance
Based on the Ethereum network, Curve finance is a DeFi exchange designed for Stablecoin trading. The platform is quite similar to Uniswap but since it operates only on stable coins, there is low slippage for lending and borrowing funds and less volatile for impermanent loss. CRV is the native token of the platform.