What is yield farming?
The process of earning cryptocurrency profits/rewards by staking, lending, or pooling digital assets in a virtual ecosystem is known as yield farming. It is one of the main drivers of the decentralized finance ecosystem, which is growing rapidly.
The core concept is similar to that of “passive investing” except that the investment tools and methods are new and more advanced. For example: using smart contracts to hold funds.
It can definitely be said that these are the financial products of the new generation of money markets.
BSC yield farming
For people interested in yield farming BSC, there are numerous yield farming platforms for the BNB chain. Among crypto holders, Ellipsis Finance, Venus Protocol, Beefy Finance, and Apeswap are some of the most popular platforms for decentralized applications. Most of these are also available as mobile applications.
To explain, let’s take a closer look at the Ellipsis Finance yield farming protocol as it has one of the largest liquidity in yield farming pools in the ecosystem and also offers attractive returns.
Note that these yield farming platforms are also known as decentralized exchanges. Another term to describe them is lending platforms.
One of the nice features of Ellipsis Finance is that you can see key stats like annual percentages (similar to annual interest earned) on the most active income farms right on the home page. Another cool thing is that platforms like this do not require any kind of identity verification.
We should think about which farm we want to enter before we start farming. We will use the BNBx BNB yield farm as BNB is the native token of Binance and the BNB chain and BNBx is the liquid staking derivative of Stader. Due to the high popularity of both coins, long-term profitability will be extremely high.
The annual percentage return (APR) that BNBx-BNB will offer us is 14.32% in this case. So if you were to lock up $1,000 in BNBx BNB liquidity for a year, you could expect to earn around $140 in yield farming returns. To get a higher DeFi yield, you can resort to smaller and less popular tokens. But these usually also carry a higher risk. Depending on your risk limit, there are plenty of options available to you at all times on Binance Chain.
Connect your wallet
You now need to connect your cryptocurrency wallet to Ellipsis Finance if you haven’t already. TrustWallet, WalletConnect and MathWallet are just some of the different wallet alternatives; However, we will use Metamask. This is because it has the highest number of users on the Binance chain when it comes to wallets that allow you to participate in decentralized finance.
Configuring the BNB smart chain on Metamask is required before you can use Ellipsis Finance with your Metamask wallet. It’s really easy to do. All you have to do is go to “Add Network” and select the BNB smart chain from the drop-down list.
If you don’t have Metamask installed, you can download it here.
Is that done? Good. You can proceed by clicking on the “Connect Wallet” button located in the top right corner of the screen.
Provision of Liquidity
Split your capital between the two farmed tokens before locking in liquidity for yield farming. To enter the BNBx BNB farm, 1,000 BNB would need to be converted into 500 BNBx and 500 BNB. Use Ellipsis Finance’s token exchange feature to exchange $500 of your BNB for BNBx. Likewise, you would need to exchange $500 of your Binance coin to BUSD to participate in a BUSD BNB farm.
Select “Swap” after selecting the BNBx BNB pool, then swap your assets between the two tokens you wish to farm. Being the lightning fast BNB chain with low transaction fees, the time it takes to complete the transaction will likely be comparable to the time it takes to read this sentence.
You now need to increase the liquidity of the platform. Right next to the Swap tab you will see the Add Liquidity option. Select this and choose the option “Add Liquidity”, now enter the desired amount of tokens and proceed. In the following pop-up window, click on the “Confirm Delivery” button and then confirm the transaction in your Metamask wallet.
Once you provide liquidity, you will receive reward tokens. These are liquidity provider tokens that serve as proof of deposit and are somewhat similar to the ticket you receive when you hand your car over to a valet.
Once you have your LP tokens, select Stake LP on the right hand side. To wager the desired number of BNBx-BNB LP tokens, enter the desired amount in the field with the option to wager. Allow Ellipsis to stake your LP tokens and you’re good to go. You have to confirm the transaction again in Metamask.
They just started yield farming on Ellipsis Finance and BNB Chain. While different procedures may look slightly different, the overall procedure is the same. You will easily learn how to navigate other platforms once you complete the process on one.
Before we decide if yield farming in the BNB chain is right for you, there is one more point we should discuss. Income farming comes with some risks, especially temporary losses.
What is temporary loss?
Liquidity pool tokens give the holder a share of the liquidity pool. For example, if someone with a 10% stake becomes the liquidity provider, they will receive 10% of the pool when they withdraw their money. The exact composition of the pool content may change over time. This could mean that the liquidity pool has grown or shrunk since it first entered.
It can also mean that the value of the paired tokens has changed. For example, the price of one token might have increased while the value of the other token would have decreased. In reality, the values of the tokens differ from each other.
If the price difference between the two locked tokens fluctuates too much, a temporary loss will occur. By exchanging the accreting asset for the declining or stable asset, traders can keep the pool balanced. The 10% of the pool that the liquidity provider receives in exchange for returning its LP token may not be worth as much as it would have if it had simply hoarded its crypto assets.
The term “temporary loss” does not necessarily imply a financial loss. The term “impermanent loss” simply refers to the difference between the value of withdrawn tokens and the value of deposited tokens. The value of income from yield farming is not taken into account.
Is there a BSC yield farming tracker?
There is an easy way to keep a BSC yield farming list for the BNB chain. Just visit the farm page of any digital asset exchange of your choice and you can see all yield farming opportunities along with stats like annual yield percentage or yield percentages. Compare and research all available options before making a decision.
You can also use sites like Coinmarketcap to find details like trading volume for the credit protocol you are interested in.
Another alternative is BscScan. Not only can you find specific token details like market cap, but you can also learn about Binance smart chain metrics like transaction fees, fuel costs, etc.
Diploma
As we noted at the beginning of the article, the yield farming process is a broad subject that encompasses a variety of tactics. If you have followed this article, you should be familiar with the basics of BSC yield farming and exploring DeFi opportunities on the Binance chain should be a good experience for you.
Have fun farming!
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