What is Yield Farming?
Yield Farming or Liquidity Mining is a developing mechanism of earning rewards from cryptocurrency capital investments. Yield farming follows the staking concept where funds are held in a crypto wallet to facilitate the transactions in a blockchain network. The digital funds held in the wallet can earn returns through a process of locking them. Liquidity mining funds are held in liquidity pools by liquidity providers (LP). They earn rewards for their investment in that exchange interface.
Yield farming is one of the popular DeFi solutions and allows investors to receive an interest for lending out their tokens. It is mainly used on the Ethereum blockchain.
What is DeFi?
Decentralized Finance (DeFi) is the merger of traditional bank services with decentralized technologies such as blockchain. DeFi can also go under the name Open Finance due to its inclusive format. Importantly, the DeFi community seeks to create alternatives to every financial service currently available. These services include items such as savings and checking accounts, loans, asset trading, insurance, and much more.
What is a Liquidity Provider?
Crypto liquidity providers are financial experts that create complicated algorithms to regulate a coin’s liquidity. This has a huge impact on the success of exchanges. When done right, market making services done by crypto liquidity providers attract organic users who know that they can instantly buy or sell any token on a given exchange.
Who are the Custodians?
Cryptocurrency custody solutions are third party providers of storage and security services for cryptocurrencies. Their services are mainly aimed at institutional investors, such as hedge funds, who hold large amounts of bitcoin or other cryptocurrencies.