Yield farming, also known as liquidity mining, involves lending or staking cryptocurrencies on DeFi platforms to earn additional tokens. Instead of letting their cryptocurrencies sit idle, users can deposit them on DeFi platforms like WingRiders or Minswap. In return, they receive (native) tokens or other fees as a reward. Rewards vary depending on factors such as asset type, quantity, duration and platform demand. Before we delve into yield farming, let’s first take a deeper look at the concept of a Liquidity pool.
A liquidity pool is a fundamental part of decentralized exchanges. It plays a crucial role in providing liquidity to the decentralized trading ecosystem. This is how it works step by step:
1. Add liquidity
A user decides to contribute to a liquidity pool by adding the same value of two different assets, in this case FACT And ADA. These assets are paired in the pool and their value is determined by current market interest rates.
2. LP token generation
In return for providing liquidity to the pool, the user receives LP (Liquidity Provider) tokens. This LP tokens represent the user’s share of the total liquidity in the pool. The number of LP tokens received is proportional to the value of assets added to the pool.
3. Trading on DEX
Once the user adds liquidity, other users start trading on the DEX via the FACT/ADA trading pair. This is the core feature of decentralized exchanges, allowing users to exchange one token for another without the need for a central intermediary. Users pay a small fee to the liquidity pool per trade.
4. Fee distribution
When trades take place in the FACT/ADA pair, trading fees apply. These fees typically represent a small percentage of the transaction amount and are paid by merchants. Individuals who provide liquidity to the pool receive a fee in proportion to their share of the pool.
(5. Liquidity mining done?)
If you want to exit the liquidity pool, you must withdraw your tokens (ADA and FACT) by redeeming your LP tokens. Your tokens will be refunded to you based on the LP rate at that time.
The core idea of liquidity pools is to ensure that there is enough liquidity available to traders, which helps reduce price decay (the difference between the expected and actual price of an asset when executing a trade). Liquidity providers are incentivized to contribute assets to these pools as they earn a portion of the trading fees generated by the platform.
Offers for yield farming additionally Rewards for liquidity providers when they Mission your LP tokens within a smart contract. These yield bonuses serve as additional incentive To allow the community to contribute liquidity to a pool, separate from the trading fees generated by the liquidity pool. To create Yield Farm we need to add an additional step to the previous process. This is how it works step by step:
1. Add liquidity
A user decides to contribute to a liquidity pool by adding the same value of two different assets, in this case FACT and ADA. These assets are paired in the pool and their value is determined by current market interest rates.
2. LP token generation
In return for providing liquidity to the pool, the user receives LP (Liquidity Provider) tokens. This LP tokens represent the user’s share of the total liquidity in the pool. The number of LP tokens received is proportional to the value of assets added to the pool.
3. Stake LP tokens in a farm
To participate in the Yield Farming program and unlock its rewards, you must deposit your LP tokens into a smart contract, often referred to as a “smart contract”.Farm yard.”
4. Earn APR
When users stake their LP tokens in the yield farm, they start earning rewards in the form of an annual percentage rate (APR). The APR, also known as the “Annual Percentage Rate”, represents the annualized interest rate. It provides a clearer understanding of the total return and potential income from staking LP tokens in the Yield Farm.
(5. Yield farming done?)
Withdraw your staked LP tokens and accumulated rewards from the Farm yard.
Still confused? Check out Paul’s explanation!
Orcfax assigned 20,000,000 FACT for Yield Farming Rewards. We expect this allocation of FACT tokens to be enough to provide an interesting APR for farming over several months. Although we cannot say for sure as APRs depend on the FACT price and the amount of liquidity added, we will aim to provide an APR above 30% for all liquidity providers. You can now start adding your liquidity to WingRiders or Minswap, staking your LP tokens and earning FACT tokens!
- Go to https://app.wingriders.com/pools and find the ADA/FACT pool
2. Click on “ADD LIQUIDITY” and add an equal value of ADA and FACT
Note: The “ADD LIQUIDITY” button only appears if you hold both ADA and FACT in the same wallet
3. Click on “ADD LIQUIDITY” and follow the steps in your wallet interface
4. After confirming your transaction, you will receive LP tokens
Note: All of the above steps are described in the “How does a liquidity pool work” section.
5. After you get your LP tokens, you need to use them on the WingRiders farm. Go to https://app.wingriders.com/farming/all-farms
6. Search for ADA/FACT Farm and click “DEPOSIT”.
7. Deposit your LP tokens on the farm and follow the steps in your wallet interface
8. Congratulations! You have deposited your LP tokens on the farm. You can manage your LP tokens on the WingRiders portfolio page
- Go to https://app.minswap.org/liquidity
- Add an equal value of ADA and FACT and click “Add liquidity” and follow the steps in your wallet interface
Note: The “Add Liquidity” button only appears if you hold both ADA and FACT in the same wallet
3. Go to https://app.minswap.org/farm and search for ADA-FACT farm
Note: Pools open September 23rd at 9:00am UTC!
4. Click on “Mission” and add your LP tokens to the farm by following the steps in your wallet interface
5. Congratulations! You have deposited your LP tokens on the farm. You can manage your LP tokens on the Minswaps portfolio page
It is important to note that providing liquidity also carries certain risks. The value of assets in the pool may change due to market fluctuations and liquidity providers may experience this temporary lossThis represents a temporary loss in the value of their assets compared to simply holding those assets. It is important for liquidity providers to carefully consider these risks before participating in a liquidity pool. Read more about the risks of the liquidity provided here.
More about Orcfax
website: https://orcfax.io/
Documents: https://docs.orcfax.io/
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Twitter: https://twitter.com/orcfax
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