SmartBCH farm and staking tokens with 1000000% APR, where is the money coming from?

I was having a conversation with a good friend in the smartBCH community about the best token that someone should invest in to get maximum rewards. I told my friend I love to invest in a token that has higher staking and farming APR, then my friend replied and said that I don't know anything about basic token economics. He told me a token with a higher APR for staking or farming has a higher chance of being dumped. A higher APR token comes with higher inflation. Since more tokens are being minted in order to pay more to people staking or farming the coin will easily get dumped. I think this is a valid point.

With smartBCH having hundreds of farm and staking tokens and new projects coming up daily, investors are always looking for the token project that gives a higher yield farming or staking. But, there is one question I like to ask; Where is the money coming from to pay such a higher APR to all the people staking or farming the coin?

nterestingly, my friend sent me a link to an article about how liquidity protocol such as yield farming and staking works. After researching the article I realized I have been making wrong decisions with the tokens I have invested in the past which are mainly motivated by the higher APR those projects provide for farming the tokens.

We have to be practical about investing in a project. Although a higher APR is an attractive feature, it is also a key problem. Higher APR means higher inflation, higher inflation means a token value decreases rapidly while the tokens devalue at a huge rate, this is one of the big problems that smartBCH projects face right now.

Although A higher rate usually creates demand for a farm token and pumps the price, this increase in price usually doesn't last long, as soon as more farmers join in the yield farming the rates start getting much lower. As soon as farmers get impacted negatively, they start dumping the tokens leaving investors in the cold. When this happens, massive dumping follows bringing the token price down to nothing.

How then can we avoid these pitfalls in smartBCH?

I am not proposing that we completely avoid investing in smartBCH tokens that have a higher APR for staking and farming. A higher APR is a great feature and as I mentioned earlier it does boost the price of the token and so, it is very good for staking. What I am talking about is when we want to invest in a project with a long-term goal in mind. I am proposing that we hold smartBCH tokens that have lower farming or staking yield APR in our portfolios because such tokens were created without inflation in them.

Another thing to consider is the use cases of the token you want to invest in. If the use cases are mainly for staking and earning farm yield, It's certain that such token would dump quickly. Staking and farming are not enough to prevent token dumping. Tokens with unique uses cases and less inflation should be your pick. Such a token has the ability to maintain a stable value and continue increasing gradually.

A great example is the JOY token, there is a mechanism that keeps strengthening the JOY token, the token has only 4 million total supply with nearly 3.9 million already in circulation, and most of this is held in Joybots, the NFT of the project. This NFT becomes a hedge for JOY tokens' price since it can only be purchased with the JOY tokens and also serves as a requirement to use the Joystick play-to-earn game's platform.

The fund from Joybot's minting is paid to Jobots stakers at a considerable APR. So, there are not much tokens to dump. And since each Joybot minted means a purchase of some Joy tokens, the price of the token keeps increasing making each Joybot minted more valuable and also more stable, and so, there is no need to dump the token quickly when a lot of farmers are joining the system.

I think this is a good mechanism to look out for in a project before investing money in it. A project with such use cases will always maintain a steady and upward growth. I used to be looking at the Joystick token project with a biased mind, but after studying the mechanism of the project I had a change of mind and make the project my top priority.

I think this article lay bare what we need to look out for in a project before we make a decision to invest in it.

Do I recommend you invest in Joy tokens and joybots?

Certainly, I will give you a yes anytime, I personally regretted not knowing about the project early on, and also selling the few Joy tokens I got for free instead of holding them. I am putting in my wallet for this token and holding on to my joybots.