PrivacySwap on Yield Farming, Liquidity Providing, and their Impact on the world of Finance
Regardless if you are new to blockchain technology or a professional crypto investor, the idea of decentralized exchanges still sounds confusing sometimes. Since PrivacySwap understands this all too well we are here to explain the fundamentals of yield farming and liquidity providing and their essence in today’s revolutionary finance world.
Before we dive in, note that this is not financial advice. Rather these are learnings from the PrivacySwap experience while building the platform to provide a better and secure decentralized exchange platform to our users. We wanted to share how we visualized the space and impart what we did so everyone can do it, too.
Yield Farming and Liquidity Providing
Yield farming and liquidity providing (LP) serve as the blood of most decentralized exchanges platforms as they provide the most nutrients to the whole platform. In short, they are the most beneficial aspects of the DeFi space. Crypto holders may lock up their assets in exchange for incentives in the form of extra cryptocurrency thanks to yield farming. To be more explicit, by investing cryptocurrencies in a DeFi market, investors may earn fixed or variable interest.
Powering a marketplace
To be part of LP, all you need to do is add funds to a liquidity pool (smart contract), responsible for powering a marketplace where users carry out several procedures with their tokens. This includes borrowing, lending, and exchanging. Once the funds are locked up in the pool, you’ll get fees generated from the underlying DeFi platform or reward tokens. In addition, some protocols can even provide payouts in the form of multiple cryptocurrencies, allowing users to diversify their assets and lock those cryptocurrencies into other protocols to maximize yields.
As a newbie at crypto investing, it is always necessary to understand the whereabouts of the platforms or technology you will invest in, including their current engagement. Yield farming initially started under the canopy of the ethereum. However, as the general public gradually recognized the said feature, it started to branch out into different networks such as Binance Smart Chain, Polygon/ MATIC, and Solana.
The Binance Smart Chain (BSC) leading the network race
Moreover, the primary goal of these DeFi platforms is to maximize users’ assets in return for more tokens. In this regard, the Binance Smart Chain seems to lead the network race, as it offers various services, ranging from non-fungible tokens to token swapping to decentralized money markets. Polygon or MATIC, on the other hand, is a straightforward business that is difficult to carry out. Their mission is to provide tools that allow transactions involving their Ethereum/Solidity smart contracts, which are mostly developed by third parties, to occur as rapidly and cheaply as possible while still bringing in more money than they spend. They demand a fee for each transaction. Their Matic token is used to pay for the charge. This means you must buy Matic Tokens to use the features of their network and smart contracts.
On the other hand, Solana is an open-source project that uses the permissionless feature of blockchain technology to deliver decentralized financial (DeFi) solutions. It also attempts to enhance scalability by combining the blockchain’s core proof-of-stake (PoS) consensus with a proof-of-history (PoH) consensus. Small-time traders and institutional traders alike are interested in Solana’s unique hybrid consensus methodology.
Furthermore, such networks play important roles in businesses because institutions engaged in blockchain technology expand much quicker than traditional software.
Companies like Polygon have significantly different financing requirements since their companies are decentralized rather than built entirely on a cloud computing platform like AWS. The basis of decentralization is an independent party, usually referred to as miners in Proof of Work networks such as BTC or validators in Proof of Stake networks such as Polygon Matic and a few other crypto descriptive words, putting up their capital to provide computing resources to support the network platform.
Leveraging the DeFi advantage
This innovation is advantageous over traditional investment as the latter requires a hefty amount of money to create a perfect application and host your server. Also, additional human resources are needed to run and support such applications. Whereas DeFi has third parties, who run the platform effectively with their computing power in return for rewards in the token of that network.
The same principle applies to PrivacySwap, where the platform also has this third-party staffing that manages the assets’ movement in the platform. The staffing, however, will be compensated with 10% of the total profit( not the capital) as a performance fee which is divided as follows:
- 0.5% for the harvester. The person who pays for gas using users’ BNB will receive 0.5% of the revenues from that harvest.
- 0.5% for the strategist. The person who created the smart contract strategy.
- 3% for the Treasury. PrivacySwap uses it to undertake PRV buybacks to lower its circulation.
- 1% for the developer. This information is used to improve PrivacySwap’s products.
- Vault Rewards: 5% of the total. Users who invest in PRV Single Asset Vaults share in the profits.
More so, the platform uses its native token, the PRV, to incentivize the staff who perform such services. By these, PrivacySwap showcases how they have control over any movement of the assets. This feature helps both the platform and the user to grow financially gradually.
Further, because PrivacySwap is token-driven, they are inexpensive to run with dispersed and decentralized operations than a typical centralized business. When a crypto-based company competes against a traditional company, the crypto-based company may have a high cost of capital and cost of operations advantage. Thus, it serves as a threat to many financial institutions.
Decentralized Finance evolution over the past few years has been highly notable. The effect of such growth is visible to all the success and achievements the cryptocurrency market receives almost every day. In addition, recognition and collaboration from big companies justify how successful crypto has become.
Moreover, yield farming platforms also started to create trademarks and received attention from the general public. PrivacySwap, as one of the fastest-growing yield farming ecosystems, offers the highest quality and secure yield farming service with the very least farms and pools. Having fewer farms and pools provides more security and privacy. In addition, PrivacySwap also aims to promote the usage of their PRV tokens and how beneficial it is to be part of their early stage now. Furthermore, PrivacySwap also aims to educate newcomers about crypto and DeFi space through its monthly DeFi classes