With Smart Bitcoin Cash, you can enjoy a cheap-to-use network, and as such, you can take full advantage of DeFi regardless of your income; you can start as low as one dollar, and that is because SmartBCH is just has started and because transaction fees are cheap. But investing in DeFi is not without risks; you can make money, but you could also lose it. But the opportunity is here, and anyone willing to learn can do it and prosper, given you do your homework before investing.
The first and most obvious risk is the price of a particular token; just like Bitcoin and Bitcoin Cash, your profits and losses will depend on the price you bought and the price you sell at. But this is true of all assets, not just cryptos; the price that someone else is willing to pay is a risk that investors must understand before investing any money on any project. Because of how liquidity works on DeFi, you could incur an impermanent loss.
All farming protocols that require an AMM (Automated Market Maker) will produce this risk no matter the network. In the case of Mist Swap, liquidity providers that are farming have the same trouble. The four decentralized exchanges competing in the SmartBCH ecosystem all use AMM, so they will all have the same issue.
Pretty much when your preferred token goes up in value against either USD or BCH or the contra party token you provided, your liquidity pool will have fewer tokens but more Bitcoin Cash or your other half of the token, and if the price goes down, you will have more of your prefer token but less in the other half. LP farming requires 50/50, so you must provide 50% on Mist and 50% on BCH to participate in a Mist/BCH pool.
In my case, I started with 360,000 Mist and 6.04 BCH, but if I check my pool, I will have less Mist and more BCH because the price has gone up since the time I started my farm; if prices go down, I will have more Mist but less BCH. That is what we call Impermanent Loss. To upset this loss, we get rewards for providing our funds to the pool, and this is the whole reason farmers get rewards.
I already cashed out $700.00, which I sold was around 40,000 Mist, and now from the time since I took that profit, I have accumulated another 34,000 Mist.
This is my pool farming.
318565+34000=352565
360000-352565=7435
In my pool, my losses are 7435 Mist but remember that I already took 40,000 Mist but remember that money you already used up is gone and gone forever, at least from an investment perspective, so I still have to stake my farm for at least three days to get even.
But what about the BCH?
When it comes to BCH, as long as it doesn't come below 6.04 BCH, my farm will be fine, and as long as the actual value of both BCH/MIST stays above $7000,00, I will also be acceptable. What I am saying is that when providing LP and farming, you have to observe all the prices involved in your investments that include the token you buy, bch, and dollars as well, at least until the fiat currencies are still relevan4t.
I started on Nov 1, 2021, and I already got $700 out, and I am up at least $1000.00, not to mention that my IL is just about to get even; once I get even, I will know that my $700 take out was purely unadulterated profits.
The story doesn't end there...
Now I must continue saving my daily interest because eventually, Mist could go or go down, which means I will have to have my daily interest saved up to upset any IL that I may get in the future.
LP farming sure is fun, at least that is the way I see it because if nothing more, I like it that I have to think twice before spending my money.
Update!!
I no longer hold MIst, nor am I farming Mist/BCH; for a while longer, I will be farming SOV/BTC in the RSK sidechain, but when it comes to Impermanent Lost Bitcoin Smart Contract, I will be farming Mist/BCH sidechain is no different, and the high fees only make it worths.
I hope to return to SmartBCH once I have learned all there is to know about DeFi with Bitcoin RSK.
