{"id":7920,"date":"2022-06-12T16:41:08","date_gmt":"2022-06-12T11:11:08","guid":{"rendered":"https:\/\/aayushbhaskar.com\/?p=7920"},"modified":"2022-06-12T16:41:08","modified_gmt":"2022-06-12T11:11:08","slug":"top-yield-farming-protocols","status":"publish","type":"post","link":"https:\/\/aayushbhaskar.com\/top-yield-farming-protocols\/","title":{"rendered":"Our Top 5 Yield Farming Protocols","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"

Yield farming<\/a> is a collection of strategies used in decentralized finance (DeFi) that create more cryptocurrency from your existing holdings. <\/span><\/p>\n

This is a return maximization strategy that aims to enhance yield. However, the world of DeFi is extremely complex with hundreds of projects offering various prepositions and the risk of rug pulls & cyberattacks aplenty. <\/span><\/p>\n

Here we review the top 5 Yield farming protocols so that you, our readers, know who else to avoid.\u00a0<\/span><\/p>\n

1. Yield Farming with AAVE<\/b><\/h2>\n
\"Yield
AAVE App BUSD (Ethereum) Lending & Borrowing Market<\/figcaption><\/figure>\n

1.1. Introduction to AAVE<\/b><\/h3>\n

AAVE defines itself as a “decentralized non-custodial liquidity market protocol”<\/a> that allows users to assume the role of depositors &\/or borrowers. <\/span><\/p>\n

The depositors are essentially liquidity providers that allow them to earn a passive income. On the other hand, borrowers are able to collateralize their existing holdings and raise funds.\u00a0<\/span><\/p>\n

1.2. What We Like About AAVE?<\/b><\/h3>\n

AAVE is top of the list due to the sheer size of the liquidity locked into its various protocols (USD 11.53 Billion<\/a> as of the time of writing). This is a major comforting factor and reflects the trust of the community in the protocol and its robust security systems.\u00a0<\/span><\/p>\n

Also, AAVE has been designed for a multi-chain world and supports Ethereum, Avalanche, Polygon, Arbitrum, Fantom & Harmony. This ensures fast transaction speeds and low transaction costs which are unavailable on Ethereum-only networks while also facilitating a wider audience in the marketplace.\u00a0<\/span><\/p>\n

The protocol provides the full range of lending & borrowing services with the additional feature of staking. Staking<\/a> is delegating\/locking your tokens of a Proof of Stake (PoS) blockchain project to support transaction authentication on that network. More on that later.\u00a0<\/span><\/p>\n

1.3. What We Don’t Like About AAVE?<\/b><\/h3>\n

Unfortunately, AAVE requires an active understanding and participation when farming. There is a lack of automated strategies available which are not exactly user-friendly.\u00a0<\/span><\/p>\n

2. <\/b>Yield Farming with <\/b>Compound<\/b><\/h2>\n
\"\"
The Compound Intermediary Platform<\/figcaption><\/figure>\n

2.1. Introduction to Compound<\/b><\/h3>\n

Compound defines itself as an “algorithmic and autonomous interest rate protocol”<\/a> connecting lenders and borrowers. <\/span><\/p>\n

Just like AAVE, depositors provide liquidity through smart contracts to earn interest whereas borrowers pay interest to access these funds making Compound an intermediary.\u00a0\u00a0<\/span><\/p>\n

2.2. What We Like About Compound?<\/b><\/h3>\n

All the things to like about AAVE are to like about Compound. <\/span><\/p>\n

As of the time of writing, the protocol has USD 5.4 Billion<\/a> of liquidity locked up with 310,000 participants reflecting trust in the protocol and its security systems.\u00a0<\/span><\/p>\n

2.3. What We Don’t Like About Compound?<\/b><\/h3>\n

Unfortunately, like AAVE, there is a lack of automated strategies available. Our only other criticism is that it is solely on the Ethereum network. <\/span><\/p>\n

This has a very negative impact on its ranking in terms of comparing transaction costs with AAVE.\u00a0<\/span><\/p>\n

3. <\/b>Yield Farming with <\/b>Curve Finance<\/b><\/h2>\n
\"Yield
Curve Liquidity Pools<\/figcaption><\/figure>\n

3.1. Introduction to Curve Finance<\/b><\/h3>\n

Curve Finance<\/a> is a liquidity protocol for exchange trading primarily focused on stablecoins. <\/span><\/p>\n

They are on the Ethereum blockchain with,\u00a0 as of the time of writing, USD 8.34 Billion of value locked into its smart contracts. <\/span> Liquidity providers are rewarded through LP tokens which may be staked or converted to stablecoins.\u00a0<\/span><\/p>\n

3.2. What We Like About Curve?<\/b><\/h3>\n

Unlike AAVE & Compound where the protocol aims to connect depositors and borrowers, Curve aims to utilize the liquidity lock-up on its platform to act as a market maker for exchange trading. <\/span><\/p>\n

In layman’s terms, decentralized exchanges draw on the liquidity pools of Curve to conclude swaps thus ensuring that the liquidity parked with Curve is always and consistently put to best use. <\/span><\/p>\n

Resultantly, the interest generated on Curve pools is generally very competitive and rewarding.\u00a0<\/span><\/p>\n

3.3. What We Don’t Like About Curve?<\/b><\/p>\n

The basic criticism is primarily the lack of automated strategies & the transaction costs of Ethereum as with AAVE & Compound. <\/span><\/p>\n

However, I would like to add that the website and app represent extremely poor visual UX, with the protocol aiming for a vintage 90s feel.\u00a0<\/span><\/p>\n

4. <\/b>Yield Farming with <\/b>UniSwap<\/b><\/h2>\n
\"\"
Top 5 Swap Pools on Uniswap<\/figcaption><\/figure>\n

4.1 Introduction to UniSwap<\/b><\/h3>\n

Uniswap<\/a> is a DEX operating on the Ethereum blockchain. They operate under a no-trust system whereby liquidity providers invest in a pool of two tokens which creates a market for that trading pair. <\/span><\/p>\n

This allows trading to happen on the said pair (through swaps from one token to another) in a trustless manner with the trading fee being paid out to the Liquidity providers as a return.\u00a0\u00a0<\/span><\/p>\n

4.2 What We Like About Uniswap?<\/b><\/h3>\n

The system is extremely simple and transparent, with best-in-class security. As of the time of writing, USD 5.83 Billion<\/a> of value is locked into the protocol providing liquidity to hundreds of trading pairs.\u00a0<\/span><\/p>\n

4.3. What We Don’t Like About Curve?<\/b><\/h3>\n

Unfortunately, the fact that this is Ethereum-centric exposes it to the risk of high transaction costs. This is a barrier to entry for those with small portfolios.\u00a0<\/span><\/p>\n

5. <\/b>Yield Farming with <\/b>PancakeSwap<\/b><\/h2>\n
\"Yield
Farms on PancakeSwap<\/figcaption><\/figure>\n

5.1. Introduction to Pancakeswap<\/b><\/h3>\n

Pancakeswap<\/a> is BNB Chain’s answer to the Ethereum-focused Uniswap. <\/span><\/p>\n

Using liquidity pools comprising two tokens, a market can be created for any trading pair with liquidity providers earning the trading fee. This is a no-trust DEX<\/a> similar to Uniswap.\u00a0<\/span><\/p>\n

5.2. What We Like About Pancakeswap?<\/b><\/h3>\n

A simple and transparent system with top-notch security and the added benefit of being on a cost-efficient blockchain. These factors make Panckaswap a sure winner. <\/span><\/p>\n

No wonder that USD 4.63bn<\/a> of value is locked on the protocol which puts it at par with its Ethereum counterpart – Uniswap.\u00a0\u00a0<\/span><\/p>\n

5.3. What We Don’t Like About Pancakeswap?<\/b><\/h3>\n

The world of DeFi is primarily an Ethereum-heavy one. Other chains are competing to take a share of the pie with an overall movement towards an interoperable and multi-chain future.<\/span><\/p>\n

However, at present, Ethereum remains the dominant force. In this respect, BNB chain & Panckaswap offer a much smaller universe of tradable assets as the focus is on BNB Chain tokens only.\u00a0<\/span><\/p>\n

Concluding Note<\/b><\/h2>\n

The total value locked in DeFi, as at the time of writing, is USD 129.75 Billion<\/a> of which 65% of all total value locked is in Ethereum. <\/span><\/p>\n

This helps explain that yield farming has essentially been a high transaction cost strategy. With the advent of low transaction cost chains & Ethereum Virtual Machines, there is a drive to make DeFi more accessible. <\/span><\/p>\n

That being said, a fundamental problem is that DeFi & yield farming are not easily explained or automated enough. Hence, being fully versed with the strategy you want to implement is important.\u00a0\u00a0<\/span><\/p>\n\"\"","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"excerpt":{"rendered":"

Yield farming is a collection of strategies used in decentralized finance (DeFi) that create more cryptocurrency from your existing holdings. This is a return maximization strategy that aims to enhance yield. However, the world of DeFi is extremely complex with hundreds of projects offering various prepositions and the risk of rug pulls & cyberattacks aplenty. …<\/p>\n\"\"","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":9,"featured_media":7961,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[112],"tags":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/aayushbhaskar.com\/wp-content\/uploads\/2022\/06\/Top-Yield-Farming-Protocols.png","acf":[],"yoast_head":"\nOur Top 5 Yield Farming Protocols (2023) - Aayush Bhaskar<\/title>\n<meta name=\"description\" content=\"An Introductory Review Of The Top 5 Yield Farming Protocols That We Believe You Can Safely Use to Lend, Borrow & Provide Liquidity\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/aayushbhaskar.com\/top-yield-farming-protocols\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Our Top 5 Yield Farming Protocols (2023) - Aayush Bhaskar\" \/>\n<meta property=\"og:description\" content=\"An Introductory Review Of The Top 5 Yield Farming Protocols That We Believe You Can Safely Use to Lend, Borrow & Provide Liquidity\" \/>\n<meta property=\"og:url\" content=\"https:\/\/aayushbhaskar.com\/top-yield-farming-protocols\/\" \/>\n<meta property=\"og:site_name\" content=\"Aayush Bhaskar\" \/>\n<meta property=\"article:published_time\" content=\"2022-06-12T11:11:08+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/aayushbhaskar.com\/wp-content\/uploads\/2022\/06\/Top-Yield-Farming-Protocols.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1920\" \/>\n\t<meta property=\"og:image:height\" content=\"1080\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@FinAayush\" \/>\n<meta name=\"twitter:site\" content=\"@AforBhaskar\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\">\n\t<meta name=\"twitter:data1\" content=\"6 minutes\">\n<!-- \/ Yoast SEO Premium plugin. -->","gt_translate_keys":[{"key":"link","format":"url"}],"_links":{"self":[{"href":"https:\/\/aayushbhaskar.com\/wp-json\/wp\/v2\/posts\/7920"}],"collection":[{"href":"https:\/\/aayushbhaskar.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/aayushbhaskar.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/aayushbhaskar.com\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/aayushbhaskar.com\/wp-json\/wp\/v2\/comments?post=7920"}],"version-history":[{"count":0,"href":"https:\/\/aayushbhaskar.com\/wp-json\/wp\/v2\/posts\/7920\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/aayushbhaskar.com\/wp-json\/wp\/v2\/media\/7961"}],"wp:attachment":[{"href":"https:\/\/aayushbhaskar.com\/wp-json\/wp\/v2\/media?parent=7920"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/aayushbhaskar.com\/wp-json\/wp\/v2\/categories?post=7920"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/aayushbhaskar.com\/wp-json\/wp\/v2\/tags?post=7920"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}