Decentralized finance, or DeFi, has exploded atop the Ethereum blockchain this year. In doing so, the sector’s top apps, like trading protocols Uniswap and Curve, have never been more used or popular.
In recent months, this DeFi boom has been rapidly accelerated by the arrival of the new hit “yield farming” phenomenon. But what is yield farming, how does it work, and how can you participate?
In today’s post, we’ll be breaking down the ins and outs of yield farming for beginners so you can eventually start harvesting crypto on your own 👨🌾️🚜
What Yield Farming Is
DeFi apps are fledgling, and they need users to grow and actualize.
To this end, this year DeFi projects have been increasingly turning to yield farming. This process involves protocols distributing governance tokens to their users to bootstrap activity and incentivize the support of key early stakeholders.
Let’s take the example of major DeFi borrowing and lending project Compound, which rolled out farming around its COMP governance token earlier this year. Compound distributed COMP retroactively to its past lenders and borrowers and offered ongoing COMP rewards to its current ones.
In other words, you could earn COMP — and thus a future say in Compound’s governance — just for using Compound. That’s yield farming in a nutshell.
What You’ll Need to Start Farming
To start yield farming, your checklist is pretty simple. You’ll only need:
- An Ethereum address (ideally a hardware wallet)
- Some ETH to pay for transactions
And that’s all! Once you have your wallet and ETH prepared, you’ll be ready to move on to analyzing and identifying which yield farming opportunities are right for you.
Finding Farming Opportunities
New yield farming campaigns are popping up everyday at this point. Figuring out which ones are worthwhile to participate in is half the battle.
The good news is that plenty of resources have recently popped up that make this process a lot easier. Some of these…