Have you ever wondered what NFT Yield Farming entails during your career in the crypto industry? Does it have anything to do with traditional agriculture at all? And why is this term so popular lately?
For several reasons, the crypto community has undoubtedly started paying more and more attention to non-fungible tokens. Its rapid growth in popularity and demand has attracted many enthusiasts over the past two years.
NFT yield farming is just one of the things within this industry that has garnered a lot of interest. If it bothers you that this term refers to agriculture, no, we will disappoint you. NFT farming refers to where DeFi and NFTs collide.
To understand the whole concept behind NFT yield farming, let’s start from scratch and look at what yield farming even constitutes, shall we?
NFT Yield Farming – everything you need to know about it
NFT yield farming is clearly one of the hottest topics since the DeFi summer of 2020. In 2021, the total locked value of liquidity pools continues to make new highs, leaving crypto enthusiasts wondering what yield farming is and what the key information is.
We have seen that NFTs are expensive but not liquid. More specifically, not until DeFi thinking kicked in. The excitement in DeFi has shifted to the NFT market. Groups are formed to mint scarce digital artifacts to be authentically acquired and to fund their ownership.
It seems that almost everything in DeFi lately seems to be linked to Yearn.Finance in one way or another. NFT yield farming became popular when the profusion of strange new experiments was cited, most notably by the MEME token, inspired by a tweet from ConsenSys contributor Jordan Lyall.
The NFT Yield Farming crossover event
Source: bitscrunch.com
Source: bitscrunch.comNFT yield farming became one of the hottest topics in the fall of 2018 as excitement arose after years of fertilizing. Finally the harvest was done. After the DeFi gateway developed Y.Insure, an entirely new insurance primitive and a way to get KYC-free insurance for any crypto asset, it used non-fungible tokens to represent the policy with insurers.
According to Yearn lead developer Andre Cronje, insurance policies contain unique characteristics. Therefore, ERC-20 made no sense. Once reminded of the existence of ERC-721 by DeFi’s top Chad, the industry appeared to be running with it.
It is evident that the causal relationship between NFTs and yield farming is still uncertain. What is clear by now is that the bigger point of DeFi and NFT coming together is more growing sentiment than just a transparent chain of events. DeFi showed entirely new ways in which available funds can become more elfin; Elves need toys, so NFTs fitted the bill.
Blockade Games, for example, represents a company focused on finding new ways to push the properties of tokenized game assets to the limit. According to Blockade CEO, gamers want to play, and crypto communities have always tried to be games.
NFT yield farming in the gaming world
Undoubtedly, DeFi has entered the blockchain gaming space, which is fantastic news for all pro gamers. It allowed players to show off their gaming skills, collect their rewards as NFTs and use them within the gaming platform to generate income.
NFT will revolutionize the gaming industry right after music and art. Blockchain-based gaming platforms use NFT gamification and yield farming to maximize player rewards and keep them as hooked as possible.
DeFi platforms using NFTs with yield farming
We have brought you the most exciting and important DeFi gaming platforms leveraging NFT gamification with yield farming:
- finance
- MOBOX
- zookeeper
- Pulsar farm
- Money
What exactly is yield farming?
Source: pixelplex.io
When it comes to yield farming, the NFT world seems to have improved from previous examples, especially in the gaming world. Yield farming represents a practice of lending or staking crypto assets to generate high rewards or returns in additional cryptocurrency. We’re talking about a volatile, innovative, and risky application of decentralized finance known as “DeFi.”
Its popularity peaked lately due to its other innovations, such as Yield farming is the most notable growth driver of the DeFi sector right now, helping it grow from a market cap of $500 million to $10 billion in 2020.
Understand yield farming
Yield farming protocols are known to incentivize LPs and liquidity providers to lock or stake their crypto assets in a liquidity pool based on smart contracts. Remember that these incentives can be:
- interest from lenders
- A percentage of transaction fees
- Governance Token
Returns are expressed in APY, which is an annual percentage return. The value of returns issued falls accordingly as more and more investors add their funds to the relevant liquidity pool.
liquidity reduction
First and foremost, numerous yield farmers have staked popular stablecoins like DAI, USDC, and USDT. Nonetheless, the most popular DeFi protocols operate on the well-known Ethereum network. They offer governance tokens for liquidity mining in general.
These special tokens are framed in these liquidity pools in exchange for providing liquidity to DEXs, i.e. decentralized exchanges. Keep in mind that once a yield farming participant earns token rewards as additional compensation and becomes a celebrity following COMP’s jump to its platform users, published by Compound, liquidity depletion takes place.
A large majority of yield farming protocols are responsible for rewarding liquidity providers with governance tokens, which are typically traded on decentralized exchanges like Uniswap and centralized exchanges like Binance.
NFT farming explained
Source: medium.com
Unlike traditional yield farming, which requires you to deposit digital assets into a liquidity pool in order to receive tokenized rewards, NFT farming uses NFTs instead. The main goal of NFT farming is to create liquidity and utility for NFTs.
Before the advent of NFT farming, non-fungible tokens were considered exclusive digital collectibles that could only be purchased, held, and traded by their collectors. Nowadays, NFTs can be used to earn tokens, creating the new kind of utility for digital assets and improving their liquidity.
Currently, NFT farming is mostly found in blockchain games, where users can stake in-game items to get tokens, or vice versa.
Axie Infinity – an example of a blockchain game
Axie Infinity is one of the best examples of a blockchain game with NFT farming capabilities. It is an excellent example of NFT yield farming. The Ethereum-powered game allowed players to earn SLP tokens for minting NFTs in the form of new Axies.
Besides the Axie Infinity game, other DApps also offer NFT farming opportunities. Some of these DApps are Mobox, SuperFarm, and Aavegotrchi.
How does NFT farming work?
You’ve probably heard that NFTs exist on blockchains like Binance Smart Chain, Ethereum, and Polygon. These digital assets also follow standards and can be used in numerous applications. An NFT is interoperable. A digital asset can connect to many different smart contracts or programs.
To start NFT farming, users need their crypto wallets. Once they receive it, it is important to connect their crypto wallet to some of the blockchains. They must first fund their wallet with a specific token, depending on their platform of choice.
After that, it is necessary to stake this token in a pool. In the end, users can earn rewards based on their share of the total pool. Remember, the main idea behind this is the staking portal. Additionally, a staking portal allows you to build NFTs into vaults from which you can earn rewards.
NFT farming with SuperFarm
Source: cointelegraph.com
Perhaps the easiest way to get into NFT farming is with an NFT farming DApp called SuperFarm. With it, you can easily access it with the Trust Wallet DApp Browser. Thanks to the cross-chain protocol, you can super use the platform token and earn GEM tokens. GEM tokens are used to buy NFTs, which are regularly released during NFT drops. Also, you can get SUPER tokens with your Trust Wallet by exchanging an ERC20 token for SUPER if you are using the Ethereum version.
Finally, it is possible to securely provision and store your SUPER tokens in SuperFarm in the Trust Wallet app. When you’ve accumulated enough GEM by depositing SUPER tokens into the famous SUPER pool, you’re ready to harvest NFTs on the next drop.
Remember that you can use SUPER as a medium of exchange. As the platform progresses towards a more decentralized model, you can also use SUPER in governance matters.
What is the risk of NFT yield farming?
Now that you are familiar with the concept of NFT yield farming, what exactly is the risk involved? Along with its benefits, NFT farming is one of the riskiest approaches in the crypto universe.
Numerous NFT farming opportunities are currently experimental. It’s an entirely new breed of crypto-earning opportunity, and it remains to be seen whether or not it will stand the great test of time.
Similar to conventional yield farming, NFT farmers are also faced with vulnerabilities in the DApp’s smart contract code. This can result in volatility risk in the platform token or a complete loss of funds. As a result, people could face significant losses converting the tokens they earned back into fiat currency or stablecoins.
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