Want more tips and tricks? (⁠click here⁠)

#wupples #wupplescrypto #crypto #yieldfarming

In our last lesson, we talked about the future of yield farming.

Today, we’ll look at farming on Compound.

Compound is an Ethereum-based protocol that allows lending and borrowing of cryptocurrency assets.

The lender offers a loan by providing liquidity to the Compound platform, then they get interest on the loan supplied.

The lender’s interest is then calculated based on the ratio of supply and demand for that particular cryptocurrency provided, which (of course) may fluctuate over time.

Lending capital on DeFi money markets like Compound and Aave is about the easiest way to earn returns in decentralized finance (DeFi).

You can deposit stable coins like DAI or USDC to either of them and start earning yield instantly.

Aave usually has better rates than Compound because it gives borrowers the ability to choose a stable rate of interest instead of a fluctuating, variable rate.

This stable rate tends to be higher for borrowers than the variable rate, which increases the marginal return for the lenders.

However, one of the most appealing additions made by Compound is the incentive mechanism for yield farmers through the issuance of its native governance token, COMP.

In fact, anyone who lends or borrows on the Compound platform can farm a certain amount of the COMP tokens.

Currently, 2.312 COMP tokens are distributed daily across the Compound user base—meaning that, at about $400 per COMP token, more than $920,000 additional rewards will be given out each day.

These COMP farming rewards are, of course, diluted across the platform’s 294,000 suppliers/farmers and 8600 borrowers.

Despite the relatively low APYs, the incentive for users to farm on Compound remains amazingly high.

In addition, Compound has its own native interest-bearing tokens called cTokens, which are used to pay yield farmers for supplying liquidity to the protocol.

When farmers supply and lock SETH on Compound, for example, the protocol automatically generates ScETH tokens, which earn farmers interest and can be redeployed on other DeFi platforms as well.

Farmers can then redeem their cETH for ETH at any time, plus their staking rewards.

For beginning yield farmers, it’s advisable to start farming with the Compound platform because of the COMP incentive and its ease of use.

You’ll just need to acquire some crypto used on the platform, such as ETH, BTC, and stable coins such as DAI, USDT, USDC, and BUSD (for BSC farming).

Remember you’ll be paying a small ETH transaction fee to move your funds around.

It’s important to note that the more assets a yield farmer supplies, the more potential borrowing power they’ll have.

Basically, the more you have, the more you can get back.

In our next lesson, we’ll look at farming on Uniswap.

#cryptocurrency #crypto #cryptocurrencies #cryptonews #cryptotrading #cryptocurrencynews #cryptotrade #cryptolife #cryptoworld #cryptomining #cryptomeme #cryptography #cryptokeys #cryptos #cryptomemes #cryptocoin #cryptotrader #cryptocurrencytrading #cryptocoins #Crypton #cryptomoneda #cryptolifestyle #cryptomoney #cryptozoology #Cryptocurency #cryptorevolution #cryptocurrencyinviestments #cryptotraders #cryptoinvestor #cryptowallet