Sign Up Here for the CT Club! https://patreon.com/cryptotips Get My Free Newsletter: https://learningcrypto.com Twitter: https://twitter.com/blockchainchick Instagram: https://www.instagram.com/realcryptotips/ LBRY: https://lbry.tv/@Crypto-Tips:b __________________________________________________________ LINKS FOR ADDITIONAL READING FOR THIS VIDEO & ALL INFO IN TEXT DOWN BELOW: Video Suggestions: Your Introduction to DeFi: https://youtu.be/mqdD_2rX4-0 What Are Smart Contracts?: https://youtu.be/BlPZDtaRKL0 How To Find a Great DEX: https://youtu.be/AMsp3knAfBs Calling Out Fake DEXs: https://youtu.be/h_cZyGqjKrs ________________________________________________________ Links and Additional Reading: Beginner’s Guide to DeFi: https://defipulse.com/blog/zero-to-defi-cdai/ Helpful Article: https://cryptobriefing.com/yield-farming-defi-beginners-guide-earning-interest-crypto/ Stats on DeFi Platforms: https://defipulse.com/ Uniswap Taxes: https://www.forbes.com/sites/shehanchandrasekera/2020/02/21/how-uniswap-taxes-work/#7e9a3b6a57f5 ________________________________________________ Two options: Money markets and Liquidity Pools Each come with additional incentives. Money markets are safer, but liquidity pools often offer better returns but liquidity pools also are much more risky (smart contracts involved have quite frequently been hacked recently) If you’re trying to deicide on the type of yield farming you’d like to try, there are three things you’ll need to take into consideration: -How much capital are you willing to use -How long are you willing to tie up that capital -Amount of risk you’re willing to take on We will start with the simplest form of yield farming and really, just the basic concept of this DeFi space and that is participating in Money markets. Which are platforms that allow you to lend out your crypto and earn interest. Naturally, these platforms match these lenders with borrowers BUT the borrowers aren’t necessarily money from this simple set up, in fact they are paying the interest rate for the loans that they take out in addition to the fact they are often required to over-collateralize their loan in order to provide some sort of security in case the value of their loan begins outperforming the value of their collateral. In which case their collateral is liquidated to cover the loan and is given to the lender. So we have the basic activity of lending and borrowing but what really inspires this all to take place can be found in the incentives. For example, if you are lending the stable coin DAI on the Compound platform, instead of being rewarded with your interest rate every so often, you are first rewarded with cDAI tokens which represent your deposit in addition to the interest that it gains. On top of this, you are also issued the COMP token as a sign of gratitude for providing your coins to Compound for that service. Compound also incentivizes the borrowers by also issuing them COMP tokens as a sign of gratitude for choosing their platform to take out a loan. Liquidity Pools Uniswap and Balancer With liquidity pools you are basically offering your coins to be available for trades and paid a fee for doing so. So the amount of liquidity you provide is translated to that platform giving you its native token. The pièce de résistance: What people are doing now is they are both lending and borrowing at the same time to farm those token incentives from both sides and taking those tokens to other platforms and essentially doing the same thing on those other platforms. Much like how day trading requires you to execute a great many trades to see any chance of a profit, yield farming in this way also requires you to make a great number of transactions. Each transaction comes with a cost of transaction fees and since most of this activity is taking place on the Ethereum blockchain, those fees have a reputation of getting out of hand when users and their transaction activity flood the network. This is why investments of $100-1000 will actually cause you to lose money through all of the fees involved from the transactions taking place. If you want to participate in this activity for making profits, you’ll have to invest upwards of $100,000+ Purely so that the interest you are paid will cover both the interest you are also paying (as the borrower) as well as the fees that are involved with each transaction. Here is what you need to know before you go: Interest rates vary day by day. Whether or not these native tokens will hold their value in the long term is really a moot point as we are witnessing this DeFi space explode, fundamentals won’t mean much in the relative short term, but one day fundamentals will matter so consider taking your profits from these tokens and trading them for something more solid.