Farming is one of the methods of earning money. You lend your coins. And then you get a percentage from them. You can also add coins to the liquidity pool. In order to get into the pool, you need to put two coins. The coins must be for the same amount of money. After debiting coins from the wallet, you will receive a token. Which will show you what part the coins in the pool occupy. The fewer participants in the pool, the larger your share. When one of the users leaves the pool, your income will increase.
In a pool where your coins already exist, you will be paid a percentage. For the fact that users trade coins in a pool with your resources. That is, when a user sells or buys coins, you will receive a commission.
Farming, like the whole cryptocurrency, is risky in general. And also not stable at all.
The emergence of farming
Farming has appeared quite recently. In 2020, the COMP token began to spread gradually. Thanks to him, people began to receive a one-year percentage. The Compound platform began to expand it.
Cryptocurrency farming is directly related to AMM. This is part of decentralized exchanges. Suppliers of liquidity, that is, those people who lend at a percentage to the pool. They invest their finances in a liquidity pool. The pool always provides the market. And people borrow and borrow. For this, a percentage is calculated from them, which is given to the one who lends. That is, the liquidity provider. The main point is that the supplier receives a percentage that is based on the invested funds.
Instability. Cryptocurrencies are constantly changing. Crypto trading is not a stable income.
Fraud. You can inadvertently invest coins in false schemes. Scammers are very common in this area. Need to be vigilant.
Loss of money due to constant price changes.
The main profit of farming is :
The Total Blocked Value, or Total Value Locked, TVL, is the amount of blocked cryptocurrency on DeFi credit platforms and other money markets. The “golden rule” sounds like this: the more money is blocked, the more profit can be.
The Annual Interest Rate, or Annual Percentage Rate, APR, is the amount of interest you pay annually.
The Annual Percentage of income, or Annual Percentage Yield, APY, is the actual rate of return that you receive from the invested amounts. In this case, interest accrual matters.
Agriculture is not immune from capital losses. Daniel J. Smith believes that the profitability of farming, as well as investment in cryptocurrency in general, is still very uncertain. In his opinion, the risks when you block coins while farming prevail.