Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com. Liquidity mining, also known as yield farming, has become one of the most popular uses for cryptocurrencies in 2021, with billions of dollars worth of crypto assets now locked up in farming platforms. But while the practice is still picking up considerable momentum, a lack of innovation among yield farms has somewhat stifled enthusiasm — with copycats,...
Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com.
Liquidity mining, also known as yield farming, has become one of the most popular uses for cryptocurrencies in 2021, with billions of dollars worth of crypto assets now locked up in farming platforms.
But while the practice is still picking up considerable momentum, a lack of innovation among yield farms has somewhat stifled enthusiasm — with copycats, clones, and low quality yield farms becoming more numerous by the day.
Nonetheless, there are a number of creative projects continuing to push the envelope, helping to further fuel the explosive growth of the yield farming space. Some of the most promising candidates are detailed below.
Cross-Chain Liquidity Mining
For those that are familiar with liquidity mining, you’re likely aware that the process is typically a single chain affair — you provide liquidity on an exchange and earn farming rewards for doing so.
But YeFi, a novel DeFi ecosystem building on multiple blockchains (including Binance Smart Chain and YottaChain), is set to become one of the first platforms to provide cross-chain liquidity mining rewards. The platform is designed to provide an extremely attractive interest rate to those holding a variety of coins, including BTC, ETH, USDT, FIL and YTA — but eventually including other assets relating to decentralized storage networks, such as Chia and Storm.
These rewards are paid in YEFI tokens, which will eventually be bridgeable to multiple chains using YeFi’s upcoming cross-chain bridge.
The platform is looking to bridge two of the most promising blockchain sectors — decentralized data storage and decentralized finance (DeFi) — to produce a solution where users can help contribute to decentralized data storage projects to boost their yields. Right now, the platform offers up to 80% APY on a variety of tokens staked through the YeFi DApp with both 1-day and 15-day deposit options available.
Beyond this, the YeFi protocol will eventually allow offer a variety of DeFi products, including a highly capable lending and borrowing market, which will allow users to either supply assets in return for a relatively stable return, or borrow funds at a reasonable interest rates.
YeFi is unusual in that it is one of the few platforms to bypass the issue of “impermanent losses” — i.e. the potential losses that can occur when supply volatile assets to a liquidity pool due to changes in the pool weighting over time. It achieves this by allowing users to earn yields on a single cryptocurrency at a time, rather than on LP tokens as with most other yield farms.
Building Sustainable Tokenomics
Right now, the vast majority of yield farms suffer from a common pain point — supply-side liquidity far outstrips buy-side liquidity.
Though many of these projects offer impressive utility for the token alongside yield-farming rewards, the excess token supply inevitably leads to suppression of the token value. This is undesirable from a longevity standpoint, since it limits the growth of the project.
But Pera Finance — a novel yield farming protocol built on Binance Smart Chain — might just pose the solution. Rather than incentivizing only supply-side liquidity through farming rewards, Pera Finance allocates a large percent of the PERA token inflation to liquidity providers and traders.
The platform introduces the first decentralized trading competition that is designed to increase buy-side demand for the PERA token. The top 10 PERA token traders by volume are handsomely rewarded for strengthening the volume of the token.
Day 1 for PERA adoption week!'Pera Bridge' will enable adoption in over 100 projects$PERA's DEX competition tech is ready for the projects in the @PolkaFoundryThe first-ever CEX+DEX trading competition is live on @gate_ioTomorrow, major announcements for 30+ new tokens! pic.twitter.com/IDrsPqdryt— Pera Finance (@PeraFinance) July 7, 2021
Despite starting as a simple decentralized exchange, PancakeSwap now offers a wide array of additional features, including NFT collectibles, prediction markets, yield pools, initial farm offering (IFOs) and more. As a result, the platform has managed to maintain the interest of its users over the long-term, and has spawned myriad similar projects on other blockchains — including Solana’s Raydium and Fantom’s SpiritSwap.
Given that the utility of an asset is closely linked with its demand, it stands to reason that yield farms that double down on utility stand the best chance at achieving long term success.