Yield farming is one of the most popular ways to invest in DeFi. It’s beneficial for both users who want to earn rewards and DeFi platforms that want to keep their liquidity. This post will cover what you’ll need for successful yield farming development as well as how to get ready if you decide to implement a DeFi yield farming methodology.
How does yield farming operate and what does it entail?
Yield Farming is a new approach for cryptocurrency investors to make money while they sleep. If you have tokens, you can lend them out on DeFi platforms in exchange for more tokens. So, how do “yield farmers” make a living?
Any DeFi network that allows “farmers” to earn money needs as many tokens as possible in order to ensure that they can be exchanged quickly, i.e. high liquidity. To do so, bitcoin owners or “farmers” deposit and freeze their funds on the exchange, generating a liquidity pool. A liquidity pool is a group of funds that have been locked in a smart contract. Token holders become liquidity providers, in exchange for which they are paid in tokens. Yield farming is the procedure detailed here.
Liquidity providers employ yield farming to give a means for other customers to borrow and sell funds. Yield farming can be significantly more profitable than putting money in a bank account. The tremendous volatility of cryptocurrencies, on the other hand, brings with it some risks. There’s also the possibility that a smart contract will contain an error, resulting in the loss of not only earnings, but all investments as well. So, let’s talk about the distinctions between staking, yield farming, and liquidity mining.
What is the difference between a yield farm, a liquidity mining operation, and a staking operation?
The technique by which blockchains based on the Proof-of-Stake (PoS) algorithm operate is known as staking. Stakers are users who self-configure a node and join a PoS network to act as a node validator for the blockchain. The major goal of staking is to ensure not just the platform’s liquidity, but also the security of the blockchain network. The more users wager, the more decentralized the blockchain becomes, making it more difficult to hack. When it comes to DeFi staking, though, yield farming is one of the different types.
Liquidity mining is a process that aids in market equilibrium. DEX users are rewarded for contributing their assets to a common pool of liquidity, which boosts the exchange’s liquidity.
The distinctions between various sorts of yield farming platforms are obvious. Their purpose is to generate revenue by supplying assets to various protocols and platforms.
Development of a DeFi yield farming platform
On the market, there are a variety of platforms and protocols that allow users to earn passive income from their crypto assets. They also have varied yield farming practices and characteristics. The amount of characteristics determines the complexity and pace of yield farming growth. So, before we get into the nitty gritty of the building process, let’s look at some yield farming platform samples.
Farming yields of various kinds
- Compound, MakerDAO, and Aave are three of the most well-known yield farming platforms. Let’s have a look at them.
- Compound is a platform for algorithmic loans and lending. Any user with an Ethereum wallet can lend their money to Compound’s liquidity pool and start earning money right away.
- MakerDAO is a decentralized lending platform that allows DAI tokens to be issued on ETH, BAT, USDC, and WBTC. DAI is a stablecoin with a 1:1 exchange rate with the US dollar.
- Aave is a decentralized loan and credit technology that yield farmers utilize extensively. In exchange for their funds, the lending party (liquidity providers) receives aTokens. When these tokens are produced, they immediately begin to generate revenue.
Decentralized finance, and specifically yield farming protocols, are a technological and financial breakthrough in finance, bitcoin economics, and computer science. So, how do you make a DeFi yield farming platform?
The development of a DeFi yield farming platform.
The DeFi Yield Farming Development is identical to the development of any other DeFi product. The five stages of the yield farming development process include discovery, design, development, testing, and launch. Let’s take a closer look at them now.
The discovery phase aids in the definition of the project’s goals and objectives, the creation of a feature list, and the selection of a technological stack for implementation. During this phase, business analysts collaborate with the customer to assist develop a bridge between the project’s business and technological solutions. We recommend that you do not neglect this step because it allows you to reduce project risks, optimize budgets, and shorten time to market.
Self-executing smart contracts are the cornerstone of any DeFi product. Because such contracts must perform as intended and be free of flaws, they necessitate a high level of blockchain understanding. Because DeFi protocols are a popular target for hackers, you should take the security of your smart contracts very carefully.
It is mandatory to test your product for bugs before releasing it. Not only should DeFi testing cover functionality and usability, but it should also involve security testing. Auditing smart contracts before exposing the protocol to the market is one of the best practices. Smart contract auditing is a method of examining a piece of code for defects, vulnerabilities, and dangers.
The DeFi yield farming development procedure works like this. You’ve come to the ideal location if you’re seeking for a DeFi yield farming development company. Our skilled development team can assist you in creating a cutting-edge DeFi project.
Expertise from Suffescom
The DeFi industry has recently gotten a lot of attention. The community became infatuated with DeFi yield farming after Compound gave free COMP management tokens and some of their holders claimed annual returns of 100%. That is why it is more important than ever to consider your yield farming development.
For more than 5 years, Suffescom has been delivering blockchain wallet development services. The company’s in-house development team has considerable experience constructing cryptocurrency exchanges, wallets, DeFi aggregators, lending/borrowing protocols, staking and yield farming systems, and other platforms. Suffescom has been rated among the top blockchain development businesses by Techreviewer, Upvotes, DesignRush, and Clutch on numerous occasions. Please do not hesitate to contact us to discuss your next project.