Cryptocurrency is known for its effective and efficient outcome over the years. Despite that, project developers continue to face and encounter severe problems and extreme circumstances up until today. Similarly, we at PrivacySwap are not spared from these issues, and that is why we are here to discuss one of those problems: the risk of yield farming.
Note that this article is written not to expose the dark side of blockchain or stop you from investing in crypto, as everything can be done positively if the ecosystem you will be engaging with was studied and understood thoroughly. Moreover, this is also to raise awareness as not every day is a sunny day in the realm of investment.
Yield farming is said to make you wealthy while you allow technology to use your assets. However, there are consequences a yield farmer might face along the way to achieve those successes. Nevertheless, a veteran yield farmer is always willing to take risks in return for profits, but beginners might find such problems overwhelming. To prepare you for the impact of yield farming, we have listed them down below:
Carbon Footprint is indeed the most prominent consequence the entire blockchain community faces. Yield farming is not an excuse for such ramifications. Auto Compounding requires extremely high gas (and gas fee). Thus, it leaves behind a carbon footprint on the environment. However, the whole blockchain industry is continuously improving its services to reduce the carbon footprint produced by such technologies.
If you’ve been around DeFi services, you might probably hear this term. To simplify, you will suffer an impermanent loss when the price of your tokens changes from when you placed them in the pool. The loss is proportional to the size of the change. To add up, when you supply liquidity to a liquidity pool and the price of your deposited assets changes from when you placed them, you suffer an impermanent loss. The more significant the change, the more vulnerable you are to impermanent loss. In this situation, the loss translates to a lower dollar value at the time of withdrawal than it did at the time of deposit.
PrivacySwap is also encountering these consequences since our platform offers yield farming. However, we continually develop our platform to make sure that everyone will end their day profitably. In addition, creating an article like this and conducting FREE DeFi classes are part of our goals to educate the general public and create an ecosystem that is fruitful and highly interactive.
However, as clocks continuously tick, hidden problems could be discovered. Nonetheless, an early solution for the inevitable situation is always better as PrivacySwap believes that “prevention is better than cure.” One of the early innovations we at PrivacySwap does is secure the LP tokens you staked in the platform on “vaults.” Then, technology will route your tokens to staking pools such as PancakeSwap or Venus LP’s. Take note that underlying risks could still occur under such staking pools. Nevertheless, PrivacySwap guarantees security to protect all those assets you staked into them.
Join us as we revolutionize the world of finance! Join the PRVarmy now and greet yourself a “Good More Earning” every day.