While dozens of new DeFi projects promise users yummy profits, not all of them manage to satisfy the craving for profit. Why are DeFi users still starved of earnings and how can they take the piece of the pie than they deserve? Let’s find out how to select a reliable and efficient protocol for farming.
Why Do DeFi Yield Farmers Stay Hungry?
With DeFi services gaining traction, cloned DeFi protocols are becoming increasingly popular. There are myriad food-themed services appearing on the horizon. SushiSwap, KIMCHI Finance, Spaghetti Money, Yam Farmer, Pizza Finance, Hotdog – all these protocols claim to offer delicious profits. But do they live up to users’ expectations?
There are three major problems with traditional DeFi services and their clones:
- Low profits.
- Security flaws and bugs in smart contracts.
- Scam projects.
Being tempted by tasty profits, yield farmers invest millions of crypto in liquidity pools but stay with empty glasses – long-term profit cannot drop from faulty protocols. It goes without saying that the ever-changing market and crypto price fluctuations leave users with slim pickings.
But does it mean that farmers are doomed to starve in the era of food-themed DeFi projects? Absolutely not.
Types Of DeFi Yield Farmers
Let’s take a look at the groups of yield farmers that exist in the DeFi universe and consider how they can increase their profits.
Ordinary Farmers
They invest all their crypto savings in traditional DeFi services (Maker, Compound, Uniswap). Such projects accept the user’s deposit and provide a proportionate amount of LP tokens – these stay in the pool and generate profit via a stable/variable APY rate. A classic DeFi protocol is safe and boasts a large amount of liquidity. For example, Uniswap has recently reached the $1.4 billion threshold – all locked in its pools.
Projects like this one give users a stable profit, but a very limited one. The above-mentioned Uniswap only shares 0.3% of the transaction fees among their users and the APY rates are very unstable. Besides this, uncompensated permanent loss, ever-growing ETH gas fees plus volatile cryptocurrency prices end up devouring farmers’ hard-earned coins.
Hype Hunters
These farm in cloned DeFi projects (SushiSwap, Hotdog, and other such platforms). New food-themed platforms simply copy the original DeFi protocols and offer the same pools/rates. There’s only one difference: clones provide some native coins as an additional means of reward (SUSHI, PIZZA, YUM).
In most cases, the problems with clone protocols boil down to faulty smart contracts and security flaws – that’s what happened with Yam Finance and KIMCHI. Some projects propose smart contracts without undergoing an audit (for example, Spaghetti Money with its PASTA meme coin) but still manages to attract millions in investments.
What happens next? The notorious example of SushiSwap with its Chef Nomi selling off SUSHI proves that cloned DeFi’s may turn out to be a scam. Finally, the coins issued by these projects are prone to pump-and-dump.
Clones hit the market quickly and manage to gather millions in liquidity, but end up being scams. Thus, Hype Hunters are the type of farmers who poison the soil with fertilizers in the hope of big profits, pick the harvest once, and then leave the land barren.
Wise Farmers
These monitor the market in search of reliable and profitable DeFi services to combine the best of both worlds – technical advancements and great profits. Such projects are very hard to find but they generate fair and stable incomes in the long-run.
SpaceSwap is one such platform. It’s based on an Improved Uniswap protocol with fixed bugs and audited smart contracts. It allows users to move their Uniswap liquidity into identical pools while getting MILK coins on top of regular APY rates.
MILK coins can generate additional income while being stored in pools. Also, they can be used to buy SHAKE coins, the ownership of which grants users additional MILK. In the latter case, SpaceSwap takes 0.05% from Uniswap’s 0.3% reward and uses it to buy MILK coins, which are distributed among SHAKE users.
Finally, SpaceSwap offers a MILK-SHAKE pool with even higher APY rates and will soon be uniting the major DeFi protocols (Compound, Curve, Balancer) – each with a tailored tokenomics model and additional perks.
How To Identify A Good Strategy
In order to find a worthy DeFi protocol, it’s important to check the following aspects:
- Are smart contracts audited? If a DeFi project simply copies some major protocol, it might have security flaws and error codes. Every self-respecting platform should provide its independently audited smart contract and make it publicly available.
- Who stands behind the project? Make sure that the protocol was developed by a well-established company or team. Projects made by anonymous people are more likely to be scams.
- What is their tokenomics model like? Find out how profits are generated, how high the APY rates are, what the fees involved are, and whether any additional profit-making options are available.
- Are there any additional features available? Advanced DeFi projects provide users with comprehensive tools for boosting their profits (e.g. bonus coins, pools with higher APY rates, lower fees, etc.).
When you find a project that complies with all these requirements, you can count on stable and long-term rewards.
Conclusion
Farmers need higher rewards to cover all the risks associated with DeFi. But with advanced DeFi protocols, there’s no need to compromise your assets’ security for the sake of profits. Such platforms as SpaceSwap offer safe smart contracts, fair APY rates, and additional rewards for farmers. This type of DeFi service is a reliable and stable source of long-term earnings.
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