Yield aggregators and yield farming
Over the past few months I have been on the lookout for solid investment opportunities in the crypto space.
It's been a little bit of an uphill journey as I was looking for a solid passive form of investment that could be set on autopilot and with enough proven track record for me to feel safe to put my savings in.
Truth is, I don't think a legit asset that fits the above description a hundred percent actually exists. If it exists I wasn't able to find, at least I wasn't able to find anyone that didn't set a scam alert ringing in my head.
What I have come to learn over time is that investing takes on many different forms.
Asides money, the amount time an investor or a group of investors/team members put into making a project successful in order to increase the value of the underlying asset is an indirectly proportional factor in helping to determine the speed at which the project grows and how soon rewards can come in for the projects stakeholders.
Okay, now to my main point for this post. In my quest for getting something to put money into for rewards, one phrase kept appearing so much that I just had to know more about it.
Prior to last month, I had never heard anything about yield aggregators. I knew about yield farming in DeFi though I wasn't involved in any project of that nature, but learning about yield aggregators opened my eyes to a much more broader point of view as to how much I have missed out in that respect.
I am not someone who is really affected by FOMO, but I would also be the first to agree that I missed out on this. But, that's okay though.
What is a yield aggregator?
Seeing as we can't talk about yield aggregators without first talking about yield farming I think it is only right that we discuss that first.
So what is yield farming?
2020 was the year of DeFi, the massive growth experienced by DeFi projects that year is unrivaled.
DeFi gave rise to the idea of yield farming which simply means either one of these two things.
- Staking in liquidity pools for rewards/profits.
- Lending of crypto assets on DeFi platforms for interest.
Yield farming as a branch of DeFi was responsible for boosting the market cap of the sector to over $5billion in 2020. And since then this steady growth has not been stemmed.
From my understanding, staking for profit means you are committing an asset in your possession to a project's liquidity pool in order to help the project run seamlessly.
In return, you earn rewards in return for your staked assets. In some projects usually a fixed percentage of your initial commitment is programmed to be paid out over a periodic interval while in some other projects a more flexible reward system might be employed.
Lending for profit however is just how it sounds, you lend someone your crypto and earn interest on the loans you give out all of which will be facilitated by the platform that you are lending on.
That is a basic explanation of how yield farming works but it doesn't necessarily mean that's all there is to know about it. As with anything regarding money there are usually intricacies involved that would require a careful study.
Since this post is more about yield aggregators we will not be going into full detail about yield farming.
Since we now have a basic overview of yield farming, let's discuss yield aggregators.
Yield aggregators, finally
From the name I feel like anyone should be able to take a wild guess as to what yield aggregators do.
The key lies in the word aggregator.
Basically an aggregator is a tool or resource that aggregates.
So, a yield aggregator is a tool that helps to aggregate different yield farms in one interface so any end user can have access to different alternatives for staking and lending for profit.
With a yield aggregator, one can invest/stake in multiple projects each with different modus operandi and economy and varying amount of rewards.
I think the beautiful thing about using yield aggregators is the offer of variety that it brings to the table and the chance to help maximize profits by investing in projects.
Many atimes with yield aggregators the end user only needs to be worried about depositing their funds. Everything needed to be done between the point of deposit and withdrawal will mostly be handled by the yield aggregator system. Operations like staking, claiming rewards e.t.c are what a yield provides utility for.
Below are examples of some well known yield aggregators that can be checked out by the reader
Each of the above mentioned aggregators are well respected and known aggregators used by investors and lenders.
However, you do not have to take this as financial advise. Ensure that you conduct your own research adequately before anything else should you decide to put money in any yield farm/platform.
What's your take on yield farming? I'd love to read your thoughts in the comment section.
Posted from HypeTurf