If you are new to crypto and the DeFi space, you are probably confused about how liquidity mining and yield farming work, as well as their good points and drawbacks. No worries, we aim to educate everyone. In this article, we will provide you with a short explanation about liquidity mining and yield farming, as well as their pros and cons.
Before discussing the pros and cons of both yield farming and liquidity mining, it is good to start off with a refresher. So what are liquidity mining and yield farming?
Liquidity Mining vs. Yield Farming
Liquidity mining is the process of earning tokens by providing liquidity. It also allows you to earn native tokens (in our case, PRV tokens). On the other hand, yield farming transfers liquidity across several DeFi platforms to optimize the return. By doing so, yield farming will reward users with LP tokens.
Despite the hazards of impermanent loss, both yield farming and liquidity mining provide significant rewards to their users. One of the most prominent advantages of both systems is that they allow users to make money passively. Furthermore, the system rewards every movement of the user’s assets.
In PrivacySwap, yield farming is secure as we safeguard your valuables in ‘vaults.’ Vaults enable clients to commit their assets to a smart contract in exchange for a profit. Each vault has its unique yield-increment strategy, which is detailed in the smart contract code. These vaults are set up to reinvest your money to boost your returns automatically. Vaults also offer security to the entire platform.
So what are the pros and cons of liquidity mining and yield farming?
Liquidity mining is advantageous when it comes to earning tokens by providing liquidity. However, APR gets lesser over time. On the other hand, earning LP tokens by providing liquidity and optimized reaching for more tokens is the edge of yield farming. The only downside of yield farming is the manual process of switching between higher APR pools.
At PrivacySwap, we aimed to turn those disadvantages into opportunities to improve the ecosystem. That’s why we created a platform that will change the game — the yield optimizer. This provides convenience to users as it automatically re-stakes your remaining tokens on the vault of the users. Thus, it gives you more earnings and rewards. We also aim to maximize the tokens you possess while receiving benefits from the platform. It also allows startup applications to start building their ecosystem while being “financially” supported by you!
Speaking of vaults, we heard the community! In line with our efforts to make our vaults appealing to more people, we are now openly accepting suggestions for our vault additions! While we may not be able to vault everything, those that we can, we will. For your vault suggestions, please fill-out this form.
Value-adding to the whole experience, we conduct free DeFi classes to build the knowledge of attendees in liquidity mining and yield farming, plus enable them to understand the multiple benefits DeFi yield farming has to offer. We also envision sharing more things to discover in the whole crypto space, like spotting scams, investing, and earning during the bear market season. This is one of the ways we encourage veterans and newbies to join the ecosystem as they can thoroughly enjoy the classes we conduct.
As we see how beneficial and effective our previous sessions are, we at PrivacySwap are determined to conduct more classes to continually educate everyone about the benefits of blockchain technology and its real-world usage.
Heads up, our next class will happen on July 28th and will focus on Yield Farming and Vaults. Here’s where you can save your virtual seat.
Furthermore, we encourage you to learn and interact with us every day. You can always share your comments, thoughts and communicate with other PRVarmys like you on our Telegram community.
Do you have any questions? Let us know!