The rise of Decentralized Finance (DeFi) has been explosive in dollar terms over the past year. The total value locked in DeFi on the Ethereum blockchain soared to nearly $200 billion last year. However, this impressive growth in dollar terms primarily reflects a positive valuation effect.
DeFi Yield farming gives you a new way to generate rewards from crypto. It might be challenging to benefit if you start or begin without adequate knowledge about it. Whichever one it is, you don’t have to panic or be scared. You can also benefit from yield farming, and that is why we have written all you need to know about DeFi yield farming below.
DeFi Yield farming is a process where you get rewards from your cryptocurrency by investing it in a DeFi platform. It is simply a process of allowing your crypto to work for you while you earn passively. Sounds lovely right? Yield farming works like a bank loan, where you are paid interest on the money you lent. You can lend out your crypto or borrow crypto from a platform that supports it in yield farming. Yield farming operates on smart contracts.
Just like everything that has to do with life, yield farming has its own risk. The higher the risk you take, the more profit you make. It is always advisable not to invest more than you can afford to lose.
Liquidity risk occurs when the price of your loan is greater than the collateral you deposited. You run into loss if this happens. Liquidity risk is familiar with crypto with high volatility, such as BCH or ETH.
Defi protocols are open-sourced and can be open to bugs. These bugs can affect the token price, causing a high drop in the token price.
An increased gas fee occurs on the Ethereum Smart Chain. The increase in ETH gas fees has been rising, which poses a challenge for an average investor.
Composability risk is also known as “money legos,” which means that all DeFi applications and platforms can interact without permission; the whole DeFi platform relies on each of its building blocks. Naturally, composability should not be a risk but an advantage. It is a risk because the entire platform can be down if any building blocks stop working.
RoboFi (www.robofi.io) is a Defi platform that envisions a marketplace for revolutionary Dao crypto trading bots. Through its IBO (Initial Bot Offering) system, community members can maximize their earnings in an easy, simple, and secure way. We create a safe and transparent environment based on blockchain technologies that help developers bring crypto trading bot platforms to the market. In addition, individuals will have easy access to these bot applications, thereby generating more earning opportunities. RoboFi ecosystem is fueled by the VICS token.