Earnings from Farming ⠀
In this post, we're going to take a look at this type of investing called farming. You might not even have heard of it. Enjoy learning about it.
Farming is a type of crypto investment in which you put your coins into a liquidity pool. In return, you receive a reward in the form of interest or transaction fees.
A liquidity pool is a vault where a trader can quickly exchange one currency for another. In other words, it is a vault that holds two coins, such as CAKE and BNB, in a 50/50 ratio in dollar terms. This vault is necessary to be able to provide trading on DEX.
For example, if you want to trade a CAKE coin for a BNB, as in our example, you need to:
• Go to DEX. The most popular DEX for farming is PancakeSwap;
• Connect a wallet;
• Next, change CAKE to BNB. When you perform this operation, the CAKEs you send go to the liquidity pool (vault). From there, in exchange for your coins, you will receive BNB, on the amount of your CAKE's. For this transaction you will pay a small commission.
Now the question: "What are the liquidity pools formed for?"
Market players themselves form liquidity pools and provide coins for exchange. For that, they get a certain commission from transactions within the pool.
This whole process is called farming. When you are the player who puts his liquidity in the pool.
IMPORTANT: If you want to put a particular coin into a farming pool, then you need to put another coin equal in value to the first one. For example, you want to put $1000 into the DAI-BUSD pool. Since they are two stablecoins, you would put in 500 DAI and 500 BUSD. If the rate is different, then the ratio of the number of coins will be different.
But in this type of investment, as in any other, there are certain risks. And many people don't even guess about them.
Shall we make a post about risks of farming?
YES -
NO -
Crypto_Ocean
