Cryptocurrencies farming
Farming is the process of accruing tokens as a reward for providing liquidity to a project by placing a certain pair of tokens in a pool. A liquidity pool is a cryptocurrency repository where a trader can quickly exchange one currency for another.
Farming is open to cryptocurrencies whose functionality includes the ability to create smart contracts, such as:
- Binance Coin (BNB) and BEP-20 tokens (Binance Smart Chain);
- Ethereum (ETH) and ERC-20 tokens;
- TRON (TRX) and TRC-20 tokens, etc.
How pharming works
To get into a pool, an investor must put two coins there for the same amount of money. Let’s imagine that 10 DAI is worth $10 and 10 ETH is worth $1000. For each coin to be worth $100K, you must put in 100K DAIs and 1000 ETHs. So in total you’ll put in the pool $200k worth of cryptocurrency.
How much you can earn with farming
Estimating the return on investment in this area is quite difficult. These calculations will never be 100% accurate because cryptocurrency farming is a fairly competitive market. It develops quickly, and therefore the rewards can change incredibly quickly.
There are several ways to calculate the profit from pharming:
- Total Value Locked (TVL) — the amount of blocked cryptocurrency on DeFi and other money markets. At the same time, the more money is locked, the more profit can be made.
- Annual Percentage Rate (APR) — the amount of interest you pay annually.
- Annual Percentage Yield (APY) — The actual rate of return you get on the amounts you invest. In this case, interest accrual is key.
What are the main risks of farming?
Such investments are considered quite risky because the cryptocurrency can fall in value and the investor may encounter fraudsters.
The top pharming platforms are:
CoinMarketCap;
CoinGecko;
High-Risk Aggregator.
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