There are many Nigerians seeking new alternative sources of making money, and this is especially so that the naira continues to depreciate. The food, transport and rents continue to increase in price. Due to this, men are considering the cryptocurrency as a new means of earning. You might have read about or heard of bitcoin, Ethereum, or even trading crypto. The trend that is catching up however is called yield farming.
It either is a strange or complex-looking name but the fact is, yield farming is no more than a simple means of obtaining more crypto using the crypto that you already possess. You do not have to be a genius in technology. All you have to do is to learn how it works, what risks are and to begin small.
So, in today post, I will describe yield farming with my simple English. What, how, why and what should you know are the questions that you will get the answer to.
Yield farming is a method of receiving reward of your cryptocurrency. You can just leave your crypto in your wallet earning you nothing or you can lend it (if it supports lending) to a system that earns you more crypto as time goes on. Consider it in relation to having your money in the bank savings account. The bank pays an interest when you save in it. However, in crypto, you do not use a bank but something called DeFi (Decentralized Finance). Instead of minute interest of 3 or 4 percent annually, however, yield farming would earn you 10 percent, 20 percent and even above.
DeFi performs the functions of banking, yet with no intermediary. Your money is in your control. Your only requirements are crypto wallet and coins in it, and the internet.
You may be asking yourself this, how do yield farming work? Just assume that you have 100 dollars of some stablecoin such as USDT (this is a coin, which is pegged to the US dollar and equals 1:1) You do not want to place it in a wallet. You desire to make money out of it. Hence, you visit a DeFi site such as PancakeSwap or Aave. You put in your USDT there. The platform employs your crypto to offer services such as lending to the other customers or assisting people to trade. As a payback, you are rewarded on the platform. This reward may be in the very coin you have deposited, or in a special token that a platform operates with (such as CAKE on PancakeSwap or COMP on Compound).
There are now a lot of better reasons why people in Nigeria are prepared to do away with yield farming. First is that It gives you more returns compared to storing in a bank. Interest offered by the Nigerian banks is very low. It is even less than 3 percent per year sometimes. However, it has the potential to provide 10-100 percent rates of yield farming depending on the platform and coin.
More to the point, it is because you get salary in dollar bomb, not naira. Most of the crypto is in US dollars so you earn and save in a higher currency. You are also able to earn in passive income. There is nothing that you need to do. After farming you simply wait and you get paid. Anyone that has a phone and data can begin. This does not require you to have a bank account or large capital.
Actually now there are certain risks in it in which I would like to speak out as well. Your revenue that you are farming can also go down in value in case the coin plunges in value. Consider the way you would farm with $300 BNB and the price slips to $200. You have been paid bigger amount of coins, but there can be smaller value.
Not only this, there are times when, Some websites are developed by scammers to touch your crypto. This that you take caution when using trusted sites. Do not share the phrase of wallet recovery. You may even have Impermanent Loss. It occurs when you put in a pair of liquidity (e.g. BNB + BUSD) and the price of one of the coins fluctuates excessively. You might lose bit of value as opposed to merely holding the coins. Computer codes are used to run DeFi platforms. Your money can be lost in case some error is made in the code or the code is hacked. This is the reason why one should be using platforms that are tried and have found their trustors.
There are even some things you can do that will prevent you losing your money which I would like to discuss below. The first is that you should Start small. Do not put in school fees or rent. Risk what you can risk losing. Also use stablecoins, Coins such as USDT and BUSD do not fluctuate in value so much, therefore they are safer to use during your first steps.
Before closing the gap, allow me to establish the equilibrium, Yield farming is not made for everybody. However in case you think that it would be easy to make money you like crypto and like a new method of achieving it, it may not be bad to do with slow steps. It has been utilized by numerous Nigerians in order to increase their money particularly when naira is low. It is more superior to leaving your crypto gathering dust in your wallet. However, one should treat it as an actual investment. Educate yourself, consult people and avoid any shortcuts.
Crypto is here to remain. Be it a student, worker, trader or a business owner, you can earn using your phone and a bit of knowledge. Yield farming provides you with an opportunity to earn passive profit of your crypto. However, equally to working on the land itself one must know how to plant, monitor and not worry about the pests (scams in this case). When properly undertaken, yield farming will enable you to save money in dollars, compound your wealth and become less worried about inflation in Nigeria. Therefore, be careful. Start small. And the most important one of all-- learn.