Understanding CeFi, DeFi & Yield Farming - Final Part

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Hello everyone, hope you all are doing good? I'm back with the Final Part of this amazing series, Understanding CeFi, DeFi & Yield Farming. If you haven't read the Part 1, Part 2, Part 3, Part 4, Part 5, Part 6 and Part 7, I strongly suggest you that by clicking here for Part 1, here for Part 2, here for Part 3, here for Part 4, here for Part 5, here for Part 6 and here for Part 7. In today's article we would be looking at the advantages and disadvantages of Yield Farming.


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Advantages Of Yield Farming

There are quite various advantages of yield farming, but I will be only explaining my top 3 advantages of yield farming, which are;

  • Higher Profits
  • Earning New Tokens
  • Passive Income

  • Higher Returns: Yield farming provides it's users massive returns on their investment which is mind blowing. I doubt if any traditional investment such as real estate, stocks, bank deposits interest, and others, could generate as much returns on investment as yield farming does.

  • Earning New Tokens: Earning new tokens through yield farming, is yet another wonder of yield farming. Can you imagine earning huge returns on your investment, as well as acquiring new tokens which could be worth more than your investment in years to come.

  • Passive Income: Yield farming has made it possible to live the dream life, which is, not working but still making money. Instead of your tokens to be sitting idle in wallets, it could be making you huge passive income, without you stepping out of your door or breaking a sweat at all. It is really amazing.


Disadvantages Of Yield Farming

There are quite few disadvantages of yield farming, but I will be only explaining my top 2 disadvantages of yield farming, which are;

  • Highly Risky
  • Liquidity Risk

  • Highly Risky: Yield farming is highly risky as it is run on smart contracts which are just codes that are stored on the blockchain and can be tempered with by a malicious hacker, which may result to a massive loss of funds. Last year, a bug in the smart contract of Yam finance affected the price of Yam token, which saw the price dropped from $167.66 to $0.97.

  • Liquidity Risk: Liquidity risk could make users of yield farming loss a huge chunk of their money. We all know that the price of cryptocurrency is very volatile. Before a borrower gets a loan, he/she provides a collateral, if there's a drop in price of the collateral provided, and the drop goes beyond the price of the loan in which the borrower requested for, his/her collateral will be liquidated immediately, resulting to a huge loss for the borrower.


Conclusion on DeFi & Yield Farming.


Decentralized Finance(DeFi) has really improved the way and manner we make our transactions. We now have more privacy on transactions we carry out, as well as our worth, in terms of assets(account balance). We can now easily send money from the comfort of our home to anyone in the other side of the world within minutes and at a very little cost. Lastly, we are in total control of our wallet, so we feel safer and more secured of our assets. DeFi is the future, this is just the beginning.

Yield Farming is an unbelievable milestone for the DeFi system, as it has enable users generate higher returns from their investment, returns that they can't possibly make with the traditional investment channels(real estate, stocks, etc). Huge passive income can be made easily through yield farming. This is truly a welcomed development in the DeFi world and the entire cryptocurrency world.


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I hope you all found the article interesting and exciting. Do well to share your thoughts about the article in the comment section below. Thanks.

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Thanks For Reading

Till Next Time, Stay Safe



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