Tron Fan Club | MEANING OF YIELD FARMING - YEARN FINANCE By @solexybaba | 10% payout to the community account

Image edited on Canva

Hello to everyone in this great community known as the Tron Fan Club Hope we are in good spirit? it has been a while due to much engagement I have not been consistent in the platform but now I am back for good. Today we will be talking about a vital topic. this is a topic that after the lesson will profit anyone who follows. Today I will be explaining an important topic tagged Yield Farming - Yearn Finance. so as I begin, I beckon on you to sit tight and relax while I drop my entry.

It is quite important to know that in the world of Defi which we all know as the Decentralized Finance and the world we can all attest to the fact that two basic things are so benefiting users and with that, it has captured the interest of many people and these basic things are known as the yield farming and also yield staking. These two basic items have been known to have benefited users and they are still benefiting users in as much as a user is familiar with these terms.

And the yield farming and yield staking can only be made when a user is having crypto assets in an application which we all know should not just be a normal application but a decentralized application that enables such operation to be carried out in it. and the yield farming and staking are done in such a way that users give out their assets to respective partners and then they will be given interest at the end of the staking and farming.

WHAT IS YIELD FARMING

Source

Now to the topic in proper, yield farming can be seen as a particular way of investing in the world of the digital currency. it is seen as a basic or one of the basic methods of investment. and this investment is done in such a way that people deposit their cryptocurrency into a liquidity pool and then after some time the users are later rewarded with interest at the end of the day.

This is a business that most cryptocurrency holders go into. instead of leaving your crypto assets in a wallet doing nothing, it is more profitable when you deposit it in a liquidity pool and then get rewarded at the end of the given period which you desire.

For more emphasis, let's assume that the yield farming and staking work just as a financial institution, where you deposit some amount of currency in which the financial institution then makes use of your currency to give it out in form of a loan and then this financial institution at the end of the day gives you part of the interest gotten from your currency on the account of your deposit.

This scenario is also seen as a way in which people with crypto assets choose to store and keep them in a self-executing contract platform which is in terms of the agreement between a buyer and a seller that is vividly written into a basic line of various codes. so users can keep their assets in such a platform which in turn will be made accessible for other individuals who wish to lend the crypto assets, so these users can now come and lend these crypto assets, and this was how the margin trading came into existence.

WHAT IS YEARN STAKING

Source

Yield staking is also another way of investing your crypto assets, It is a sort of investment in the cryptocurrency world. and this is done when a users or crypto assets holder chose to keep these assets in the smart-contract platform for a while and then in return, the user will be rewarded with some added assets that he or she has kept. this is not just seen as a business to the platform but it is also considered as a way of increasing or maximizing basic security to a particular blockchain network system. to the users gaining extra tokens is the aim and objective but it also increases the security of the said blockchain network so, at the end of the day, it is a win-win either ways.

---

The Differences between the Yield farming system and the Yield staking system

---

Source

Certain attributes differentiate yield farming and also yield staking. a few of these differences are seen below in a tabular form.

Yield faming	Yield staking
1 - In Yield farming, the risk level of farming assets is high, there are tendencies of losing one's asset due to a sudden change that might occur in the crypto market, and also there is a high rate of transaction charges.	1- In Yield staking, it is considered to be the best method of investing cryptocurrency assets, as though the transaction charges are low and it is quite stable when compared to yield farming
2 - In Yield farming, a user or owner of crypto assets is permitted to be in charge of the said assets, and with the ability, a user can choose to transfer his or her assets at any given period of their choice.	2 - But in Yield staking, the investments that have already been staked are sealed for some certain period, and as such users or owners of these crypto-assets can not access their assets until the agreed given time has come to an end before a user can get hold of the assets.
3 - In regards to rewards, yield farming do give out reward within the ratio of 2% to what we can see as 200% and this is where the issue of risk comes from. this higher risk is associated with yield farming.	3 - Regarding reward on return of investment, the reward given to users or investors is within the ratio of 5% and that comes with great comfort regarding the low risk that is associated with the yield staking investment.

WHAT DO WE MEAN BY COLLATERALIZATION IN YIELD FARMING?

Source

In yield farm, collateralization is said to be a method in which certain investors are found on the off chance that they are lending digital assets, as such options are been provided to them such as setting up indemnity against a future happening of an uncertain situation in other to cover the credit received.

The collateral is very essential as though it gives maximum security to loans collected. and these collateral operations depends on the various platform system. also certain collateral proportions are given concerning various ratios. for example, a certain platform may likely set up its collateral proportional ratio to be 3:1, 5:2, this is to say if a user wants to get a loan of 100 usdt from the Decentralized finance platform system, the said user is expected to have at minimum deposit 300usdt and if a users want to take a loan of 200usdt it is said that the users must have hard a deposit f 500usdt in other to stand in the collateral position.

With the above being said, all Decentralized Finance platforms, have their respective regulations regarding collateral proportion ratio.

WHAT IS THE FUNCTION OF COLLATERAL IN YIELD FARMING?

The main outstanding function regarding yield farming is the ability to limit certain unwanted events such as market downward market movement fall, and also to lower the liquidity risk alongside many indemnities in the Decentralized Finance platform system.

WHAT ARE THE BASIC RISKS OF YIELD FARMING?

Source

There are certain risks regarding yield farming, in as much as they turn out in profit is on the high side and with this uses are likely to fall for it, so it is recommended that investors are to take caution regarding the high risk involved.

Lowering your smart contract as a user is very important when it comes to yield farming, this is to enable you to manage less risk when things go south or when the system or platform is been jeopardized.

CONCLUSION

As we all have seen, yield farming is like an integer of yearning staking. it is seen as a way of making a profit by lending our cryptocurrency assets to the platform and then in return, users are given some tokens regarding the assets that were lent by the user.

This scenario can further be elaborated as a situation whereby a user decided to lend his finance to a financial institution where most people come to borrow money and get a loan, and pay interest when refunding the loan, so as an investor that has given the platform some money, you will then, in turn, be given a part of the interest regarding the money you gave out.

In yield farming, it aims at getting high profit on the account o investment. the return is large but it comes with a certain risk, but in the aspect of taking, the returns are quite little, but then it aims at securing the blockchain network system, and as such the risk is minimal.

I have come to the end of today's topic regarding yield farming. thank you all for following.