Among crypto enthusiasts, 2020 will not only be remembered for Covid, but the year where DeFi grew tremendously and users of DeFi protocols could earn hundreds of percent in APY. In the past year lots of people have suffered from losing their jobs, while on the other hand tech savvy DeFi participants have increased their wealth significantly. As of today $41 Billion is locked in DeFi protocols and finance has changed forever.
DeFi, however, is a challenging discipline that for many comes with sleepless nights and a high risk of losing funds. Dealing with these risks and those you can see in the photo below, is common when you start experimenting with leveraging multiple protocols to optimize the yield, you can earn.
DeFi is a whole new financial system that revolutionises how lending, borrowing and capital formation works. Anyone in the world who has an internet connection can now access financial services, but the complexity and risks involved makes it difficult for layman to participate. Without any solution to this problem, billions of people will be left behind.
YIELD App makes DeFi accessible to everyone
YIELD App is created to give its users a convenient platform that gives access to the wealth, DeFi makes possible. Users who want to not only preserve their wealth but grow it while asleep are likely to adopt YIELD App. The platform can be described as a neo-bank — it’s an alternative to your traditional bank account, that instead of 0% interest rate pays you up to an astonishing 20% APY on stablecoin deposits.
With the most simple user interface we have seen in DeFi, YIELD App is positioned to onboard the next million people to crypto. YIELD App is even targeting users who are entirely new to the space, and it’s clear that the team prioritizes to help new users get started and answer all of their questions and concerns.
Yield farming as a concept
In this section, I will give you an understanding of Yield Farming as a concept, that you won’t hear often — and I’ll touch on how yield farming actually makes networks self-sustaining and efficient.
The revolutionary aspects of yield farming are about far more than earning interest. Think of yield farming as network farming. And think of the act of farming as “a self-sustaining process”, just like a farmer can be self-sustaining. So by yield farming you are essentially making networks sustain themselves, thus making them efficient. Yield farming has the capability to bootstrap network effects in an underlying system.
Wait, what does bootstrapping mean? And what is a network effect? Bootstrapping means a series of self-sustaining processes that proceed without external help. While the term network effect means that users benefit from the activities of other users. So any system with a network effect (e.g. Facebook and Uber) can be bootstrapped using yield farming. Full fledged bootstrapping of all networks (such as those just mentioned) is far out in the horizon, but the first stage of yield farming is already a booming activity in DeFi.
Yield farming in DeFi
Farmers (participants in yield farming) provide liquidity to the lending market by depositing tokens into a pool of assets. It creates a liquid market for that particular asset. In return the farmer earns yield. UniSwap is an example of an Automated Marked Maker (AMM), where users can provide capital to liquidity pools and earn tokens in return. With a simple smart contract, UniSwap cuts out the middle man, who in the traditional financial world would maintain an order book on an exchange. Yield farming is a revolutionizing activity, that allows for capital formation with a speed we have never seen before.
Other protocols are so-called lending protocols, such as AAVE, that reduces the cost of lending and borrowing for other users in the system. As such yield farming bootstraps lending and borrowing.
A smart contract embedded on the blockchain inherits the characteristics of a blockchain. One of them being that they are open / permissionless. The beauty of this is that anyone can participate in yield farming: Whales (large holders of crypto assets) can participate and so can small token holders (some call them fish). There has been finger pointing at bad actors with deep pockets who temporarily can gain control of enough tokens to benefit themselves in a way that hurts the average user or the protocol as a whole. It’s definitely a valid point, but whales also take on greater risk and are those who can make the most impact by creating a market. People with more money tend to have better information and that’s the nature of how markets work.
To summarize, DeFi is the great equalizer. Anyone, regardless of background, gender or credit score has equal access to financial services: Anyone can take out loans and earn interest. The risks involved in DeFi including the Ethereum gas fees makes DeFi both dangerous and inaccessible to most people.
In a time where fiat currencies lose their purchasing power and a lot of people struggle, consumer centric products that is powered by DeFi — our new financial system — is more important than ever.
YIELD App launched two days ago and anyone can now sign up and start earning yield. Please let us know if you have any questions. We are happy to guide you. https://www.yield.app/
