Yield farming is a way to earn rewards by depositing your cryptocurrency or digital assets into a decentralized application (dApp). It is a colorful term to describe a widespread practice in traditional finance; namely, earning rewards (interest) on assets.
Yield farming was one of the largest growth drivers of the DeFi sector – almost $8 billion was yield farmed in 2023.
How Does Yield Farming Work?
Yield farming protocols incentivize liquidity providers (LP) to stake or lock up their crypto assets in a smart contract-based liquidity pool. These incentives can be a percentage of transaction fees, interest from lenders, or a governance token. These returns are expressed as an annual percentage yield (APY).
There are different types of yield farming, including:
Staking DeFi
Decentralized Finance (DeFi) staking, is a process where you lock your crypto assets into a smart contract in exchange for rewards and generating passive income. This concept is similar to traditional banking, where you deposit your money into a savings account and earn interest.
How does Staking DeFi work?
In DeFi staking, you stake your crypto assets, such as fungible tokens or non-fungible tokens (NFTs), into a smart contract. The smart contract verifies the staked assets and rewards you with interest, which is usually in the form of the same cryptocurrency. The rewards are calculated based on the staked amount, the staking duration, and the interest rate offered by the DeFi platform.
Types of DeFi Staking
There are different types of DeFi staking platforms, including:
Proof of Stake (PoS) coins: These coins use a consensus algorithm that requires validators to stake their coins to validate transactions and create new blocks.
Staking-as-a-Service (SaaS): These platforms provide staking services, allowing you to stake your coins without having to manage the underlying infrastructure.
Liquid Staking: This type of staking allows you to stake your coins while still being able to use them in the DeFi ecosystem.
Lending DeFi.
Decentralized Finance lending, is a type of lending that operates on a decentralized platform, allowing users to lend and borrow cryptocurrencies without the need for intermediaries. This concept is based on smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. These contracts operate on open blockchain networks like Ethereum, providing a transparent, immutable, and automated system for lending and borrowing.
How Does DeFi Lending Work?
DeFi lending platforms allow borrowers to directly take a loan through a decentralized platform known as P2P lending. The lending protocol allows lenders to earn interests on their supplied stable coins and cryptocurrencies. The underlying technology for DeFi lending is Blockchain, which utilizes all its unique features and performs exceptionally well compared to traditional lending. DeFi lending offers complete transparency with easier access to assets for every money transfer process without involving any third-party intermediaries.
DeFi Yield Farming
DeFi yield refers to the returns or earnings generated from decentralized finance (DeFi) protocols, platforms, and applications. These returns can come in various forms, including interest, dividends, and rewards, and are typically earned by providing liquidity, lending, or participating in yield farming.
Cadabra Finance Magic Yields
Cadabra Finance offers a unique rewards program that allows users to generate yields through its innovative platform. The program is built around the ABRA token, a utility token that serves as the foundation for the rewards program. The ABRA token is designed to be deflationary, with a tokenomics model that encourages growth and maximizes yield generation.
Key Features:
ABRA Token: The ABRA token is the foundation of the Cadabra Finance rewards program. It is built on a deflationary tokenomics model, offering the potential for substantial growth.
Yield Generation: Users can generate yields by participating in the Cadabra Finance platform, which is intricately linked to the ABRA token.
Token Locking: One of the key features of the Cadabra Finance rewards program is the option to lock ABRA tokens, which allows users to maximize yield generation and share these rewards with fellow ABRA token holders.
veABRA Tokens: veABRA tokens play a pivotal role in the Cadabra Finance ecosystem, offering holders the right to vote and influence project development through DAO participation. Users holding veABRA tokens enjoy additional rewards, including a share of strategy performance fees and platform-owned liquidity yields.
Benefits:
Maximized Yields: Cadabra Finance’s innovative rewards program allows users to maximize their yields through token locking and participation in the platform.
Deflationary Tokenomics: The ABRA token’s deflationary tokenomics model encourages growth and maximizes yield generation.
Influence Project Development: veABRA token holders have the opportunity to influence project development through DAO participation, ensuring that the community has a say in the direction of the platform.
Overall, Cadabra Finance’s Magic Yields program offers a unique and innovative way for users to generate yields and participate in the decentralized finance space.
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