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What is Yield Farming, the rocket fuel of De-Fi, and how do you start it?

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2022-07-21
What is Yield Farming, the rocket fuel of De-Fi, and how do you start it?

Welcome to Bitget - the world’s fastest growing crypto derivatives trading platform.

Yield Farming is one of the hottest De-Fi topics since 2020. Compared to the poor interest rate offered by traditional banks, you may be shocked by the incredible rate offered by the crypto protocols.

As an investor, you may understand risk must be behind a high return rate. In this article, we will go through all the details about yield farming with you.

What is Yield Farming?

Yield farming means lending crypto assets to De-Fi protocols to generate certain returns or rewards in the form of cryptocurrency.

Similar to the concept of money lending, you will receive a certain amount of crypto as an interest or service charge. You can take Yield Farming as a form of crypto mining without any technical requirements.

How does it work? Examples of De-Fi platforms providing Yield Farming

Smart contracts are fundamental to Yield Farming, so that people can carry out trustless transactions without any trust. They don’t need to worry about the possibility of discredibility. When the criteria set up in the smart contract are fulfilled, the programs will execute the offered tasks.

Here are four common forms of Yield Farming:

  1. Liquidity provider: There is no intermediate of a Dex (decentralized exchange). It requires a certain amount of cryptos to support the demand of different transactions.

If you lock up some of your crypto in a dex’s liquidity pool, part of the transaction fee charged by exchanges in each transaction will be rewarded to you.

Examples: Unisway is one of the most well-known dex systems and UNI is its token. In return for providing liquidity, part of the transaction fee charged by Uniswap in each transaction will be rewarded to liquidity providers.



  1. Staking: Liquidity provider can be defined as a way of staking. Another form of staking is providing the proof-of-stake to the Blockchains. The proof-of-stake is a mechanism to secure the safety of a Blockchain. If you do staking on a De-Fi protocol, you will be paid interest as a reward for providing security.

More staking into a De-Fi protocol, the greater the credibility and risk management ability of it, the higher the value of the token.

Examples: DAI is a stable coin algorithmically pegged to the value of USD. The platform MakerDAO allows users to lock up BTC, ETH and other crypto on the platform to generate DAI as a reward for staking.

  1. Lending and Borrowing: You don’t need any intermediate to carry out peer-to-peer transactions with the smart contract function. You can lend crypto to De-Fi protocols and earn interest on it. Borrowers must provide cryptos as collateral. This money lending system protects the rights of both sides.

Examples: Aave is a Lending and Borrowing De-Fi platform. They provide AAVE tokens as an interest for the lenders. The interest rate on Aave is automatically calculated based on the current interest rate.

Benefits and Risks of Yield Farming

What is Yield Farming, the rocket fuel of De-Fi, and how do you start it? image 0

BGB Earn - Low threshold, high yield

BGB Earn is an asset management platform on Bitget to invest and grow your BGB holdings. You can earn BGB every day by subscribing to a variety of products that support early redemption.

Here is the BGB Earn offer: What is Yield Farming, the rocket fuel of De-Fi, and how do you start it? image 1

Does it require a long period to lock up?

Compared to the De-Fi protocols on the market, BGB Earn offers a more flexible Yield Farming plan. It allows you to lock up for a shorter period of time with a reasonable annual return.

Does it require huge capital inflows to start?

The entry barrier is relatively low. You can just put in only 100 BGB for a try.

What is the return?

Let's say if you subscribe 100,000 BGB to a fixed seven-day product with an estimated APR of 6%, you will receive approximately 11 BGB every day for seven days, starting in two days.

Is BGB reliable?

BGB is the platform token of Bitget. Besides being used by traders to get discounts on trading fees, BGB can also be used as proof of rights and interests for users of different levels, and as a social token for the interaction between fans and copy traders.

According to the May report on BGB, the price of BGB is mainly influenced by BTC and ETH. As shown in the heatmap below, the correlation between BGB and BTC stood at 0.868 for May, while it was 0.884 for the BGB/ETH pair. What is Yield Farming, the rocket fuel of De-Fi, and how do you start it? image 2

Our first phase of BGB Earn was very successful, as the 14-day product was sold out in less than an hour.

Click here to check the APR and terms of BGB staking.

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