Crypto101 - How to Make Money with DeFiHi Traders, Investors and Speculators 📈📉
Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year. Daytime job - Math Teacher.
If you’ve been following me on TradingView for a while, you’ll now that I’m a believer – a believer in the promise of blockchain. One of the principals of this promise is to move away from centrally controlled banking systems. This would eventually include the act of saving and earning interest for the money that you leave in the capable hands of your banker (who also gets to decide whether or not you qualify for loans). Currently, you need to give up all of your personal information to open a bank account and furthermore you are seriously undercut in the returns / interest rate that you will be receiving (to name only two of many problems with the system). For example, where I reside, the most common interest on a savings account is 5% annually, whereas the interest on your credit card is 19.5% annually.
Before we continue, familiarize yourself with these Key Terms:
TVL – Total Value Locked in the platform
DEX - A decentralized exchange. Peer-to-peer marketplace where transactions occur directly between crypto traders like Coinbase and Binance
Blockchain – A unique way of coding that is open for anyone to use, many believe that web3 will be built on top this kind of coding
DeFi – Decentralized Finance such as cryptocurrencies and stablecoins
dApp – Software like apps that work on the basis of blockchain code and thus apps that accommodate cryptocurrency such as UniSwap and NFT Market places
LP tokens - New liquidity pool tokens. LP tokens represent a crypto liquidity provider's share of a pool, and the crypto liquidity provider remains entirely in control of the token. For example, if you contribute $10 USD worth of assets to a Balancer pool that has a total worth of $100, you would receive 10% of that pool's LP tokens.
APY - Annual Percentage Yield, think of it as yearly interest in percentage
Smart Contracts — Electronic, digital contracts coded to integrate with dApps. Automated financial agreements between two or more parties once the pre-determined terms of the contract is reached
With the rise of Blockchain, Crypto and then Decentralized apps, yield farming was born to address some of the banking system's limits. Or at least, that would be in the perfect world. Yield farming is the process of using DeFi to maximize returns. Users lend or borrow crypto on a DeFi platform and earn cryptocurrency in return for their services. This works for both parties, because yield farmers provide liquidity to various token pairs and you earn rewards in cryptocurrencies. However, yield farming can be a risky practice due to price volatility, rug pulls, smart contract hacks etc.
Yield farming allows investors to earn interest which is called ‘yield’ by putting coins or tokens in a dApp, which is an application (coded software) that integrates with blockchain code. Examples of dApps include crypto wallets, exchanges and many more. Yield farmers generally use decentralized exchanges (DEXs) to lend, borrow or stake coins to earn interest and speculate on price swings. Yield farming across DeFi is facilitated by smart contracts.
Let’s take a closer look at the different types of yield farming:
Liquidity provider: You deposit two coins to a DEX to provide trading liquidity. Exchanges charge a small fee to swap the two tokens which is paid to liquidity providers. This fee can sometimes be paid in new liquidity pool (LP) tokens.
Lending: Coin or token holders can lend crypto to borrowers through a smart contract and earn yield from interest paid on the loan.
Borrowing: Farmers can use one token as collateral and receive a loan of another. Users can then farm yield with the borrowed coins. This way, the farmer keeps their initial holding, which may increase in value over time, while also earning yield on their borrowed coins.
Staking: There are two forms of staking in the world of DeFi. The main form is on proof-of-stake blockchains, where a user is paid interest to pledge their tokens to the network to provide security. The second is to stake LP tokens earned from supplying a DEX with liquidity. This allows users to earn yield twice, as they are paid for supplying liquidity in LP tokens which they can then stake to earn more yield.
Yield farmers who want to increase their yield output can also use more complex tactics. For example, yield farmers can constantly shift their cryptos between multiple loan platforms to optimize their gains. Pro Tip: Use a High-Speed, Anonymous VPN. This lets you securely access the internet in an untraceable way. If you’re a cryptocurrency trader, you may want to remain anonymous or mask your IP address to another location.
With all of the above mentioned, the first step would be to determine your needs or interests and thereafter, opening an account or accounts. A few popular places to start exploring include:
1. Quint – Voted one of the best yield farming crypto platforms for 2022
2. Uniswap - Second-largest decentralized exchange (DEX) behind Curve Finance
3. YouHodler – Worldwide Exchange with yield farming
4. eToro – Regulated platform offering crypto interest tools
5. Crypto.com – Great platform for earning a high APY on Stablecoins
6. BlockFi – Popular Platform for Bitcoin yields. BlockFi was one of the first platforms to launch its own crypto credit card. The BlockFi Rewards Visa Signature Credit Card earns up to 2% back in the cryptocurrency of your choice and doesn't charge an annual fee
7. Coinbase – Top-Rated yield-generating platform for beginners
8. DeFi Swap – Overall best DeFi yield farming platform 2022 , earning up to 75% APY on DeFi coins
9. AQRU – Voted one of the best crypto Yield farming platforms for 2022
10. Aave - Reigning DeFi king in terms of total value locked
Note that the above is in no specific order. On the chart, you will see some fast facts on some of the options that these platforms offer. This is also not a shill, and I am not currently participating in any of the above mentioned. This is just intended as an easy introduction to another branch of what the world of Blockchain and DeFi has to offer.
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