Yield farming is a new investing method combining traditional agriculture and finance aspects. That may sound strange but bear with us here.
It allows investors to earn money while they sleep by lending their assets to third parties who need them for their businesses or projects.
Yield farmers can also lend their assets through peer-to-peer lending platforms. That makes earning interest on your money more accessible than ever—and you’ll have more control over where it goes!
Benefits of yield farming
Yield farming is a new way of earning interest on your assets. Participating in a yield farm allows you to earn significant amounts of interest without holding any specific investments.
Yield farms are also safer than traditional wealth management options. That is because they don’t involve direct investment or securities trading. Instead, they allow you to use your money as collateral while paying little or no interest until maturity—even if that’s never!
Yield farming leads to increased liquidity
Another benefit of yield farming is increased liquidity. Selling your assets whenever you want is a significant advantage over other investment vehicles, such as stocks and bonds.
It is beneficial if you need cash for a short-term expense or unexpected event, like a car repair or medical bill. You can sell your assets and use the proceeds to buy other assets, such as CDs or bonds, that may offer more attractive returns in the long run.
Unfortunately, given current financial conditions, those vehicles may not offer any decent returns.
Lower platform fees
Platform fees are lower than traditional finance because there are no physical offices, staff, and other expenses.
Additionally, developers can run the service on a decentralized network (like Ethereum or Stellar). Dozens of blockchains and L2 solutions facilitate yield farming and other DeFi solutions.
Ability to earn interest on your assets
The ability to earn interest on your assets without needing to sell them, buy new ones, or take any action is a benefit of yield farming.
It works exceptionally well when you have an asset that pays out income in a currency other than the one you live in.
For example, if you’re living in Canada and have dollars but want to buy euros without selling your Canadian dollars, yield farming can help you do this (with some fees). It will still involve several steps, though.
Earn while you sleep with yield farming
You can earn interest on your assets while:
- you sleep
- when you’re away from the computer
- away from your phone
- away from your house.
Your farming strategy runs on a 24/7 schedule and requires little intervention unless more appealing strategies become available.
Higher returns than traditional finance
Yield farming is a new financial venture. It is an alternative to traditional finance and offers higher returns than traditional options. You can think of yield farming as a new way to invest or earn interest.
Returns will often be very high at first. However, as more people explore the same yield farm as you, return rates will normalize. If projected returns are ludicrous, it is often too good to be true.
Conclusion
With yield farming, you can earn more than traditional finance products’ interest rates. You can also invest in assets without worrying about capital gains taxes. However, that situation may differ or change based on your jurisdiction. Even so, your income is not taxable until it’s withdrawn from your account (at which point it will be taxed at standard rates).
Farming yield is not without risks. The process involves highly volatile cryptocurrencies and yield rates that fluctuate over time. Only invest money you can afford to lose.
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