Investors always crave for high-yield financial products, but they are always accompanied with high risk. There are several tools and ways to minimize risk if you are a crypto veteran. But if you are a beginner, the best way to minimize risk is understanding what you are investing on, and avoiding those you do not understand well.
Amidst the fluctuation of crypto currencies, safe earning such as saving, staking, and farming might be good options, but of course, if you are good at trading coins, it will surely earn more. For this article, I would like to focus on Yield Farming, and skip Saving and Staking which have not much to worry about.
Yield farming (or Liquid Swap in Binance) is the concept that crypto liquidity providers must contribute a pair of tokens to crypto liquidity pools (Add Liquidity). When tokens are deposited, the pool automatically generates another token (LP) that represents the share of that pool. Finally LPs then can be used to farm for yield which is usually provided in its native token (Governance Token). The process of yield farming provides the liquidity and encourages activities in the DeFi ecosystem.
Apart from the big names like Pancakeswap or Uniswap, recently I have seen a lot of new Defi farms opening up and most of them are good farms with good ideas that somehow I think we should support them to grow further. However, we cannot deny there are also bad farms out there with scams. So the question is how we can find a SAFE farm to invest our hard earned money on. Here are some tips to look into the farm detail:
Total Value Locked (TVL): the more the better. TVL shows the farm’s popularity and trustfulness. Will anyone leave 100 million dollars locked in a platform without confidence?
Back ups: partners and back ups can imply how strong a platform has for support. For example, if it is endorsed by Binance, it is definitely somewhat credible.
Developer team: years of experience can guarantee quality work. There’s a case of a newly open farm that the price of governance token rose up to $700 in the first minute before it was dumped to less than $1 a few seconds later. It is a case study that the team could learn and prevent it to happen again in the future project.
Timeline: history and time in operation is also a factor to consider. If the farm has been operating for a while, we can suppose it will keep operating that way. To-do-list and future plan can also encourage the traffic in farm.
Certified parties: if you are not a technical person (most of us are not), how do we know that the platform coding can be trusted without being certified from audit companies like Certik, OpenZeppelin or Trail of Bits etc.?
Other than these, we can also see whether the owner/executive has their own picture shown in their website, or whether they develop the platform to support the real product in the real world. Last week I came across a defi platform that allows its own native token to be used to exchange for beers (aleswap.finance). Or a platform that allows you to mint Nasdaq stock token and farm, same idea as Mirror on Terra chain, but this is on Binance Smart Chain (try Twindex.com). Both ALEswap and Twindex are running on BSC. So you need BNB for GAS. (Get Binance account by registering at https://www.binance.cc/en/register?ref=K0NJC80A with bonus sharing 10-10% between you and me)
We may see a lot more businesses starting to accept crypto currency as a payment method for their product and service such as properties, food and drink, games, and… Beer! Umm! Isn’t that interesting?🍻