In the world of crypto, the fact that an investor is always looking for ways to increase profits or increase the amount of coins he holds in the form of a trade, there is a fairly new concept that helps increase coin that is "Yield farming".

In the title mentioned DeFi. But wait to talk about it, let's try to learn about Yield Farming first, then find the related relationship later.

What is Yield Farming?

Yield Farming (YF), also known as liquidity mining, is a way to generate rewards for holding cryptocurrencies. In simple terms, it locks tokens and receives a token reward. Exactly Staking!!!

However, YF works differently from staking, it interacts with liquidity providers (LP) to provide liquidity to the protocol's liquidity pool.

What is Liquidity Pool?

Basically, the LP is a smart contract that contains coins / tokens in it.

In return for providing liquidity, the LP will receive a reward (token). That reward could come from transaction fees generated by the basic DeFi platform or some other source.

This chain is also quite complicated, for example if you have tokens COMP. You can send COMP to another DEX exchange eg BAL, to receive a certain percentage reward.

And of course you can use that reward to send to another exchange with the same process to receive other rewards.

All of this is done on the ERC-20's platform Ethereum and the reward is also usually an ERC-20 token. However, this could change in the future.

Understand so simple, but in the future, many cross-interaction platforms will appear, then we will continue to learn, in the immediate future, to help ease the confusion.

Why is Yield Farming booming?

The first name mentioned, mentioned above, is COMP - a governance token, providing administrative rights to token holders. From there, DEX exchanges began to algorithmically distribute these tokens, and with incentives aimed at attracting LPs to provide liquidity to the Pool.

Therefore, thanks to COMP, DeFi projects have been thoroughly applied in order to come up with plans to attract huge capital to pour into DeFi projects.

Up to this point, there are more than 9 billion USD Total Value Locked (TVL) means locked in DeFi!

Total Value Locked (TVL)?

You should also know a little about TVL - basically, the health of the defi system. It is easy to understand, the higher this number proves that the system is healthy, and this decreases continuously you should be nervous.

 

How does Yield Farming work?

You may have heard something about the term automated market maker (AMM) - which means automatic market creation, it sounds strange but you seem to know some of these names: Uniswap, 1inch, Balancer, ...

And how does it work? First, the LP provides weapons to the pool, the pool allows users to borrow, borrow, buy, sell, ... each transaction will incur exorbitant fees, that fee will be sent back to the LP at the rate of%. Very simple, right?

In addition, DEX exchanges attract LPs to pour money in by paying additional tokens of value. If you have been playing farming, you will know, there are many valuable tokens such as:  SRM, SUSHI, BAL,… These are very HOT tokens today.

 

Is Yield Farming a bomb?

Last week, investors dizzy every day with the change of the market, doubled the previous day, continued to multiply the next day, increasing dramatically.

In the short term, it is undeniable that YF makes the market hotter than ever, and especially helps cash flow back into the crypto market because of the only reason, profits are terrible.

You just imagine, both invest, both profit, farm, enjoy interest, also receive valuable tokens, that token increases dramatically, compounding ... Help cash flow from everywhere back to the market. .

From sources of money in the market or from coin-top holders who are still motionless, they must be wavering.

Since then, there have been many DeFi projects as well as other YF projects, money can just pour into the impoverished world economy.

The biggest and most noticeable growth last week was probably ku Yearn Finance(YIF) and her half-brother.

However, it is the game of WHALES, SHARK, ... And this is the MONEY GAME market, so the boom can explode at any time. But don’t worry, cause at this time yield farming is safe and helpful.

Conclusion

Write short and understand enough to help everyone understand briefly Yield Farming as well as how it works, from there we will gradually learn how to use it, farm and make a profit from it. KDG team will update gradually one by one for everyone to know later.