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Definition of Stablecoin Yield Farming
These are digital currencies that have been pegged to fiat currencies or a commodity such as gold or bonds. Meanwhile, stablecoin yield farming simply means putting your crypto or stablecoin to work on decentralized finance apps for the sole purpose of earning profit. There are two means of doing this. One is by providing liquidity on decentralized exchanges, in which you assist in making markets by pooling your digital assets with those of other liquidity providers to facilitate trade. In return, you’ll get a part of the trading fee.
Another way that stablecoin yield farming could be done is by lending your digital asset on lending platforms to provide loans for those who are interested in borrowing. Individuals who lend their digital assets on such protocols get a share of the loan interest that borrowers would pay.
Furthermore, here are some more famous platforms and protocols that can be used to create liquidity. Through this, liquidity providers will get a share of the trading charges (fees).
Curve
This is a famous decentralized exchange. Curve operates in a way different from how the AMM (Automatic Market Maker) works. This protocol was created to exchange one token for another. However, the tokens that are being swapped almost have the same pegs.
A trader becomes a liquidity provider when they put their token in the pool to earn liquidity pool tokens that can be staked to earn CRV tokens. The major incentive for traders who provide liquidity is that they can increase their earned profits by nearly 2.5x, simply by locking their earned CRV, which in turn earns veCRV. The latter increases their CRV earnings and gives them more voting power.
APY.Finance
At the center, APY Finance makes the yield farming process automated. It provides users with just the interface they need to deposit their digital assets. As soon as one’s token is added to the liquidity pool, the platform shows one’s portion of liquidity pool tokens. Underneath, APY.Finance passes the deposited token across various decentralized finance platforms.
mStable
This is another protocol that was created to unify and make stablecoins stronger. The mStable protocol tries to achieve this by creating a collection of assets that accept USDC, DIA, USDT, and TUSD stablecoins. Each of these listed stablecoins is referred to as a “basket”. Each time a digital asset is put into the protocol, it then uses the protocol to mint mUSD tokens. The mUSD is more protected than other stablecoins, mainly because it is backed by several stablecoins.
Ellipsis.Finance
This is a variant of Curve created by forking the Curve blockchain. Consequently, Ellipse.Finance essentially facilitates the swap of Stablecoin. This is done with low swap charges and very little slippage. Ellipse. Finance allows users to put their digital assets into the liquidity pool to earn about 0.04% of the charges made on trades through the liquidity pool. The earned token can be staked to get EPX, which is the native token of the protocol. Furthermore, the earned EPX can also be locked to boost the reward of the liquidity provider by 2.5x.
Lending
Lending is another way to make money; anyone can become a lender. Decentralized lending platforms have stayed out of trouble because of their transparency and over-collateralization of loans. Below are some of these platforms.
Aave (AVE)
This protocol creates an avenue for borrowers and lenders to interact on a peer-to-peer level. Loans on this platform are provided by lenders, and borrowers must overcollateralize for it. Should the borrower’s account fall below a certain level, Aave can automatically liquidate the account to repay the lender.
This protocol allows users to loan out different stablecoin assets. This protocol has more than twenty markets and pays a three percent APY on some stablecoins.
Compound (COMP)
On Compound, users can lend and borrow cryptocurrencies. When a user deposits an ERC-20 token, such as USDC, he or she will receive an equivalent amount of USDC tokens. These tokens have a yield, such that when they are redeemed, one will get his or her initial token and an additional fraction of that token, which is paid as interest.
The Best Stablecoin for Yield Farming
The USDC Circle stablecoin USDC is the best stablecoin that could be used for farming. Even a lot of investors prefer using this coin as an alternative to the USDT. In 2022, Circle’s stablecoin USDC exceeded USDT as the stablecoin with the biggest supply in Ethereum.
For Investors
The bear market has made decentralized finance companies find a way of rewarding users with protocol yield, through which users can make real money. The future of stablecoins is that they will serve as normal currency for the average user. Also, as of now, stablecoins have proven to be a nice way for cryptocurrency investors to make additional money on their digital asset holdings.
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