Farms and Pools: two ways of earning money in the DeFi world
PrivacySwap’s initial offering is yield farming. We offer farms and pools as we believe these are one of the best ways to leverage your digital assets. In accordance with that, we covered the benefits of farms and pools in some of our previous content here. But since we will release our own DEX, we would love to review what farms and pools are and what benefits they can provide to crypto users.
The way farms and pools work
Yield farming is the process under DeFi that allows users to maximize their crypto assets’ usage. There are multiple DeFi platforms available — such as PrivacySwap, which offers yield farming services. Farms and pools are where users stake their tokens to yield rewards. The platform rewards these stakers by giving them a percentage (APY) of their stake in the platform.
The concept of yield farming is like lending in a bank, but you are the bank in this instance. You basically let the platform borrow your tokens, and they will give you more tokens as rewards. Liquidity providers are the users that provide their crypto holdings so the platforms can function.
There are multiple types of farms and pools where you can stake tokens. Flexible farms and pools allow users to stake and withdraw their funds at any time. These farms and pools mostly return a smaller APY. On the other hand, there are also locked pools and farms. You can still stake your tokens through these farms and pools. However, they have a specific time period when you can start withdrawing your funds. Though the platform sometimes allows you to withdraw your funds before the date mentioned, they sometimes impose penalties.
How are my rewards calculated?
APY, or annual percentage yield, is the estimated return in the yield farming process. It is the rate of return that the user gains over the course of a year. There are crypto investors who opted for a shorter investment period and want to know how much they would earn overtime. So, PrivacySwap also includes an LP token calculator to help you identify your earnings.
Example of PrivacySwap’s token calculator. Keep in mind that the PRVG/ PRV2 farms and pools are closed now since we are transitioning to PYDEX token. Also, please note that our page will also boast a new UI once we launch our DEX.
Benefits and risks of yield farming to crypto users
The concept of yield farming is beneficial to crypto investors as it provides more ways of leveraging your assets. In addition, staking gives a low-risk opportunity to give an extra return. Participating in a liquidity pool can provide more earnings. However, it is much riskier.
Moreover, you are helping the whole crypto ecosystem by simply staking your crypto assets in different farms and pools.
Risk is always involved everywhere, especially in the crypto market, as regulations are still rare. Cyber theft is still prevalent up to this date. Events such as rug pulls can still happen. However, you can choose a reliable platform that will help you earn without compromising security. An example is PrivacySwap, as we are an advocate of safe crypto space.
Aside from that, the impermanent loss is also one of the most obvious risks in yield farming and the crypto market. Impermanent loss is when the selling price of your crypto holding is less than the price when you bought it. This happens due to market volatility.
Nonetheless, it is never bad to DYOR first before investing to avoid losing tons of assets. Always remember, only invest the amount you can afford to lose.
In a nutshell,
Blockchain technology contains multiple ways of earning, one of which is yield farming. However, the question is, is yield farming for you? IF you aim to be a long-term investor, yield farming is a great investment. You can minimize the risk by simply staking or participating in lending in liquidity pools, where it is riskier.
There are lots of options to explore, such as PrivacySwap. As an advocate of safe crypto space, we aim to create a platform to provide you with great returns while utilizing smart contracts. In addition, we also utilize web3, which will provide an extra layer of protection to you and your crypto assets.
We also have PrivacyCards that will help you use your crypto assets as fiat to eliminate the long withdrawal process. With all these, PrivacySwap can be a good help for you on your fantastic crypto journey.
Come and join us now! For projects out there that aim to be listed on our DEX, reach us out through this form.