Apr 21, 2025: Our weekly Institutional Insights explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

 explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

Weekly highlight — Trump wants to fire Powell? 

US president Donald Trump is actively considering firing Federal Reserve Chairman Jerome Powell, following Trump's public criticism of Powell for not moving quickly enough to reduce interest rates. National Economic Council Director Kevin Hassett confirmed that the administration is examining this option, suggesting that Powell's actions have politically favored Democrats. Hassett argued that the Federal Reserve's decision to raise interest rates shortly after Trump took office was intended to undermine the economic impact of the tax cuts implemented during his administration, which were deemed inflationary. He further criticized the Fed for not addressing inflation concerns stemming from federal spending under President Biden, implying a lack of accountability.

During a recent press conference, Trump conveyed his dissatisfaction with Powell, asserting that if he wanted to remove him, it could happen "real fast." While he did not explicitly state his intention to dismiss Powell, his remarks highlighted the growing tensions between the White House and the Federal Reserve regarding monetary policy. Hassett defended Trump's frustrations, advocating for a focus on economic policy rather than interpersonal conflicts. This situation underscores the complex dynamics between the executive branch and the central bank, as Trump navigates economic challenges leading up to the next election.

Weekly crypto highlight — XRP ETF coming

HashKey Capital has officially launched the HashKey XRP Tracker Fund, marking the first investment fund in Asia designed specifically to track the performance of XRP, the digital asset integral to Ripple's global payment ecosystem. This fund is aimed at professional investors and offers a unique opportunity to gain exposure to XRP without the complexities of direct asset management. Investors can subscribe through cash and in-kind options, with the fund providing monthly liquidity.

Ripple, as an early backer of the fund, is looking to enhance its strategic partnership with HashKey Capital, which already manages Hong Kong–listed spot ETFs for Bitcoin and Ethereum. This collaboration not only solidifies Ripple's presence in the Asian market, but also opens avenues for future financial products, such as the potential tokenization of a money market fund on the XRP Ledger. Fiona Murray, Ripple's Managing Director for the Asia-Pacific region, highlighted that this partnership is part of a broader strategy to introduce more regulated cryptocurrency products for institutional investors in the region, aiming to foster a more robust crypto landscape in Asia.

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Weekly Institutional Insights: Trump’s desire to fire Powell might induce volatility; XRP ETF coming

Hong Kong's Securities and Futures Commission (SFC) has approved a new Ethereum ETF with staking capabilities, allowing institutional investors to earn staking rewards.

Daily top performer — Pyth Network (PYTH)

The S&P 500 dropped 1.5% to 5,282.70 this week, down 5.9% in April and 10% year-to-date, led by tech losses. Real estate and energy outperformed, while political pressure on Fed Chair Powell and inflation concerns weighed on sentiment. Gold dipped 0.6% to $3,319 after a record high, as Powell’s stagflation warning tempered its rally. Despite the pullback, the uptrend remains intact. The Coindesk Indices, which tracks the broader crypto market, are up by 0.77%, with Bitcoin and Ether rising 0.64% and 0.72%, respectively, over the past 24 hours. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today's top performer is PYTH, up 10.1%, following the launch of Pyth Entropy for secure on-chain random number generation by Soneium.

Pyth Network (PYTH),  is a blockchain oracle system that delivers real-time crypto price data to blockchains, enabling smart contracts to react to market changes. Soneium 

 Pyth Entropy, a tool for securely generating random numbers on-chain. Two apps, HandsNFT AI and 2p2e, are already utilizing Pyth Entropy to create unpredictable and engaging experiences.

Check out the latest prices, charts, and data of 

Hong Kong's Securities and Futures Commission (SFC) has approved a new Ethereum ETF with staking capabilities, allowing institutional investors to earn staking rewards. This approval follows recent changes to local laws, with China Asset Management (ChinaAMC) partnering with OSL Digital Securities to launch the ETF by May 15. The ETF will offer exposure to Ethereum staking, transforming it from a passive investment into an active participant in the Ethereum network. The staking process is powered by Kiln, with OSL providing custody and insurance services. The rewards will contribute to the ETF's net asset value, benefiting shareholders.

Yesterday, Bitcoin spot ETFs saw $25.9M in inflows, all from non-GBTC funds, while GBTC recorded no flow.

" and a points campaign called Drops, where users can earn points—potentially leading to an airdrop—by engaging with Linera content on X. To join, sign up on 

, complete tasks like joining Discord and interacting on X, then enter the campaign. Keep engaging to earn more points, but avoid spamming.

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Hong Kong approves Ethereum ETF with staking rewards, boosting institutional participation

Our weekly crypto derivatives analytics report delves into macro events; the current state of crypto and trading signals from spot trading volume; and futures, options and perpetual contracts.

US president Donald Trump’s tariff policies are influencing both crypto and US equities. Last week, BTC and the S&P 500 rallied due to a 90-day pause in reciprocal tariffs (excluding China). Equities are slightly below their April 9 highs, while BTC is holding above $83K. Its implied volatility term structure has normalized, and the volatility skew has improved from last week’s bias toward out-of-the-money puts, though it hasn't fully shifted toward calls.

Please check out the report’s highlights.

Tariff pause briefly brings back trading volume

Since our last report, open interest surged on Apr 9, 2025, as crypto spot prices rose after President Trump’s temporary tariff pause, accompanied by a nearly $10B increase in trade volumes. However, trade volumes have since returned to mid-March levels, and open interest has declined from the April 9 highs. The initial price spike indicates the tariff pause surprised the markets, but the subsequent pullback reflects concerns over remaining tariffs.

After being inverted for much of April due to trade policy shocks and macro headwinds, BTC’s term structure has disinverted, with front-end volatility dropping significantly this week. Call and put volumes have been balanced, with calls slightly exceeding puts most days. Apr 9, 2025, reflected mixed market sentiment, as both call and put volumes rose, but puts were higher overall. Open interest remains greater in calls, and has increased slightly since last week, reaching its highest level for the month (more than double from the beginning of April).

Despite a rally on Apr 9, 2025 that brought ETH close to $1.7K, traders sought downside protection, leading to higher volumes in put contracts as compared to calls. Since then, ETHUSDT options volumes have declined, but open interest remains strongly weighted toward calls with later expirations, which have increased since last week. After being inverted for much of April, ETH’s term structure of volatility has flattened, with volatility compressing around the 70% mark across tenors.

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Bybit X Block Scholes crypto derivatives analytics report (Apr 16, 2025): Bitcoin put bias has moderated, but not yet shifted to calls

KiloEx (KILO) is a user-friendly DEX for perpetuals trading, offering high leverage, rewards, LSTfi integration and a robust multi-chain ecosystem.

 trading is one of the most lucrative areas for cryptocurrency enthusiasts if you know how to navigate the sometimes complex world of these contracts. Unlike standard futures, perpetual futures contracts have no expiration date, allowing traders to hold onto their positions as long as they prefer. You only exit a crypto perpetual (or “perp”) contract when you feel it’s the best time to execute your long or short trade. The lack of an expiration period makes these contracts attractive for traders.

Unfortunately, many crypto perpetual contract trading platforms are far from user-friendly. It seems like many perpetual crypto exchanges assume that only professional traders dabble in these contracts, and along with that assumption goes a second one — that these pros can navigate even the most complex user interfaces. As a result, finding a user-friendly perps platform is a challenge in the world of crypto trading.

 (DEX) that aims to change the status quo by providing a user-friendly environment for traders. Its platform also offers high leverage ratios, integration into the wider liquid staking token finance (LSTfi) ecosystem and generous reward programs for referrers and affiliates.

Thanks to its numerous benefits, this DEX caters to the needs of traders at all levels of expertise who are interested in crypto perpetuals. Operational since mid-2023, KiloEx launched its native token, KILO, in March 2025 to further enhance its platform's reward, staking and governance mechanisms.

 (BNB) that specializes in crypto perpetual futures trading.

 The platform prides itself on offering a user-friendly interface, high 

 ratios of up to 100x, multi-token vaults with generous APYs and a number of reward programs for referrers and affiliates.

Co-founded by Joey Ni (CEO) and Charles Gong (COO), KiloEx was originally launched on BNB Chain's mainnet in June 2023. As of mid-April 2025, the platform has additionally expanded its service coverage to five 

 (B2). This coverage allows KiloEx to access the ecosystems of three leading blockchain platforms — 

Manta, Base and Taiko are Ethereum-focused Layer 2 solutions, while opBNB is an efficient and low-cost optimistic rollup for the BNB Chain, while B

 is a platform linked to Bitcoin that acts as a major Bitcoin DeFi (BTCFi) enabler.

Because it’s a BNB-native platform, KiloEx's industry footprint is most notable within this blockchain's broader ecosystem. In fact, as Apr 17, 2025, KiloEx is the top DEX on the opBNB network by 

Using Layer 2 chains allows KiloEx to offer its users fast and low-cost transactions, which isn't always possible on a typical Layer 1 network. It's true that BNB Chain, the primary Layer 1 used by KiloEx, generally has much lower gas fees than Ethereum, the industry's leading 

 chain that’s notorious for its exorbitant costs. However, KiloEx's partner Layer 2 networks help drive costs and transaction times even lower. BNB Chain's current average gas fee is slightly over $0.10, while the opBNB Layer 2 rollup's comparable fee is only about $0.005.

In 2024, the platform introduced one of its most innovative features — the 

, which allows liquidity providers to stake multiple assets to earn high yields. That same year, KiloEx significantly expanded its partnership network, becoming an active player in the LSTFi ecosystem. LSTFi is a new stream within the DeFi industry that allows you to use 

 (LSTs) on various protocols for additional yield.

Having solidified its market presence in 2024, the project launched its native token, KILO, in March 2025. However, in mid-April 2025, KiloEx 

 and halted trading on April 15 as a risk management measure, pending investigation of the damage.

The Hybrid Vault is among the most innovative features offered by KiloEx. Essentially, it acts similarly to liquidity pools on other exchanges. Liquidity providers can contribute their crypto funds to the vault to support trading activity on the DEX and earn interest on their contributions, based on the fees earned by the protocol.

You can contribute a mix of coins to a KiloEx vault. Supported assets include 

Depending upon trading activity and the mix of coins contributed, you can earn APYs as high as 30%, making KiloEx one of the most lucrative choices for liquidity providers in this niche.

KiloEx uses a health factor calculation for this type of vault to keep your funds and the entire ecosystem safe. Based on the health factor score of your contribution to the vault, your funds could be liquidated if their value drops dangerously low.

Discounts are also offered for fixed-term deposits for established assets, such as USDT and USDC. Withdrawals for the fixed deposits are processed upon maturity, while all other withdrawals are processed within one to three "epochs," with each epoch on the platform lasting about three days. Thus, depending upon your contributed funds, you’ll wait anywhere from three to nine days to receive your crypto back.

The KiloEx platform also runs a generous referral program under which you can earn rewards for referring your friends to the platform. The amount you earn depends upon the trading volumes generated by the people whom you’ve referred. Additionally, your referees to the DEX can also benefit from fee rebates, again depending upon the volume of trade they generate.

There’s a tiered system, comprising nine levels, based on which you and your friends earn commissions and rebates. Under this system, even those referred traders whose monthly volume is at the lowest level (below $5,000) can still benefit from 5% rebates, while you also earn a 10% commission.

The table below shows the structure of this referral system with percentages for commission and rebates based on monthly trading volumes.

KiloEx offers an affiliate program for key opinion leaders (KOLs) with a certain level of social media following and influence in the crypto market. KOLs may apply to join the program by filling out an application, which is then considered by the project team within 48 hours.

To qualify for affiliate status, a KOL must have: 

Approved affiliates are provided a link to the platform, and are encouraged to invite their followers to trade on the KiloEx. If they invite at least five followers who trade at sufficient levels, the affiliates can start earning their commission. KOLs can earn up to 55% commission, depending upon the referred followers' trading activity.

KiloEx’s native utility token, KILO, is a 

 asset launched on BNB Chain. It’s used on the platform for governance, fee discounts on trades, rewards via 

, liquidity provision incentives and staking.

KILO is a supply-capped asset, with a maximum and total supply of 1 billion. The token’s supply allocation shares are shown in the chart below.

xKILO is an escrowed version of the KILO token. You can convert KILO to xKILO at a fixed rate of 1:1. The primary utility of xKILO is to provide boosted liquidity provision, which makes it possible to receive staking rewards. By locking xKILO on the platform, you can access special discounts and other benefits reserved for VIP-level users. Holding xKILO also grants you governance power to vote and influence the platform's future direction.

Unlike KILO, xKILO is nontransferable and isn’t tradable on the secondary market. The only ways to obtain xKILO are either to buy it with KILO or receive it via airdrops.

Platform users can earn points to qualify for KILO airdrops. Typically, you accumulate points by trading, depositing funds, referring others to the DEX, checking in to the platform and completing other specified eligible activities.

The project’s initial airdrop, Genesis Season, had an eligibility snapshot taken back in July 2024. Under the currently running airdrop campaign, Pioneer Season, users can earn points to receive KILO tokens for 180 days past the token generation event (TGE) in late March 2025 (i.e., until late September 2025).

Additionally, you can earn KILO tokens on Bybit simply by participating in the 

 event and holding BNB in your account. Every day at various random times, Bybit will take snapshots of your BNB holdings in your Funding and Unified Trading Accounts to calculate the number of KILO tokens you’re eligible for. The campaign will run through Apr 25, 2025, 11:59PM UTC, and you’ll have your share of KILO airdropped seven days after this date.

 market as a swap pair with USDT. If you don't have a Bybit account, you can easily 

, and access opportunities across hundreds of trading pairs and crypto products on the exchange's Spot and Derivatives markets.

As of Apr 17, 2025, the KILO token is trading at $0.039, which is 76.2% lower than its ATH of $0.1648 on Mar 27, 2025, and 17.3% higher than its ATL of $0.03344 on Apr 12, 2025.

Long-term price forecasts for KILO are mostly bullish. CoinCodex 

 at $0.0387 in 2027 and then rise to $0.135 in 2030 while PricePredictions 

When it comes to perpetuals trading, both traditional 

 (CEXs) and DEXs have often struggled to offer an intuitive trading experience. In contrast, KiloEx has made user-friendliness a cornerstone of its operations. With KiloEx, you can enjoy a streamlined trading process, access market trends info for thorough research, get an overview of the cryptocurrency market and conduct other activities via an interface that’s designed for anyone, irrespective of their familiarity with decentralized trading.

The platform also boasts a diverse range of other benefits not easily found in the world of perpetuals-based cryptocurrency trading — generous leveraged trading options, trading fee discounts, lightning-fast trades, low trading fees and an innovative Hybrid Vault system. Many of these benefits are thanks to KiloEx's collaboration with several Layer 2 decentralized platforms, which provide the technical infrastructure to enable low costs and fast order processing.

If you’re a crypto perpetuals enthusiast, KiloEx is definitely a platform to peruse.

Intermediate

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KiloEx (KILO): More than a DEX — a rewarding ecosystem

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Blockchain

Crypto

DeFi

Glossary

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Yield farming in DeFi is getting more popular, but it can be confusing. We dissect everything you need to know here.

yield farming featured image

In less than ten years, we’ve seen the novel crypto space reshape everything we know. Now, we're all on the verge of perceiving the rise of decentralized finance (or simply 

) becoming mainstream with its applications in the crypto world. With the surge of $4 billion total value locked (TVL) in DeFi, this ecosystem’s development is entirely viable. Of course, crypto is volatile, but DeFi unlocks opportunities for the public. 

The upshot? More DeFi projects are introduced to sustain and transform conventional financial products run on transparent protocols without intermediaries. That’s precisely how decentralized exchanges, insurance, lending and borrowing have given rise to the newer phenomenon of yield farming.

If you find yourself struggling to understand the fundamentals of yield farming, or to assimilate the relationship between DeFi and yield farming, here’s what you need to know. Read on to decipher what yield farming is all about, including its mechanism, applications, profitability and the underlying risks.

Yield farming is a practice allowing yield farmers to earn rewards by staking ERC-20 tokens and stablecoins in exchange for supporting the DeFi ecosystem. Yield farming, also commonly known as liquidity mining, involves depositing and lending a crypto underlying a mining mechanism to support the liquidity pool for lucrative rewards.

While yield farming is comparably similar to the concept of staking, there is substantially more underlying complexity associated with this mechanism built on the Ethereum blockchain. As opposed to staking, yield farmers usually move their digital assets from one lending market to another in search of the highest yields. 

Typically, a yield farmer is required to lock their funds into a lending protocol such as Compound or MakerDAO to provide liquidity to funding pools, in which borrowers and lenders earn an incentive in the process. For example, when a yield farmer stakes 1,000 USDT in Compound, the farmer will receive a cUSDT token in return for each USDT token. These tokens can then be pumped into an automated market maker (AMM) liquidity pool that accepts cUSDT to leech off the transaction fees. In short, a yield farmer is earning incentives on Compound and the liquidity pool.

The emergence of the DeFi protocols Compound (COMP) and Aave is what gave rise to yield farming’s boom in the early summer of 2020. Soon after the COMP governance token issuance took off, the succeeding AMM participants in yield farming (such as Balancer, Kyber Network, Tendies and SushiSwap) further strengthened its growth and position. It was thereby making yield farming one of the most popular trends in DeFi. While it’s possible to farm using cryptocurrencies such as ETH and stablecoins like DAI, USDT is still a more acceptable token across AMM platforms. 

Of course, there are plenty of factors that contribute to the popularity of yield farming. But the main reason for yield farming popularity is that it offers a unique opportunity to earn yield on a loan. Regardless of your status, a yield farmer can find loopholes to stack yields, simultaneously earning multiple governance tokens. 

Yield farming is never a standalone mechanism. It usually involves extensive participation of automated market makers (AMM) — the liquidity providers (LP) that add funds to the liquidity pool from time to time to uphold the ecosystem. Following the staking concept, the LP earns rewards by facilitating the transactions on a blockchain network.

Hence, liquidity providers and liquidity pools play an indispensable role in maintaining the liquidation rate. After all, liquidity tends to attract more liquidity. 

The AMM concept is direct yet intricate at the same time. Liquidity providers who provide funds into the liquidity pool enable yield farmers to lend, borrow and exchange tokens. Every transaction will incur a fee, and these fees are paid out to liquidity providers in exchange for the service. Besides the yields, new tokens will be paid out according to the unique implementation of the protocol to encourage LPs to keep funding the liquidity pool. 

It should be clear that DeFi is based on Ethereum, although stablecoins are frequently deposited as well. Stablecoins are pegged to USD. Hence, you’ll often see coins like DAI, USDT, USDC and more in the DeFi ecosystem. However, according to the individual protocol, if you’re depositing USDT into Compound instead of getting USDT, you’ll receive cUSDT. While there are no restrictions on how you circulate the coins for maximum yields, you’re obligated to follow the protocols. That means your cUSDT is continually changing, depending on the tokens that are pegged to the protocols. 

However, yield farming is still in its initial stages, so comprehending the operations for maximum yield can be complext. On top of that, yield farmers rarely disclose their strategies to the public, making it even harder for beginning investors to understand. 

Crypto mining is based on a consensus algorithm called proof of work (PoW), while yield farming relies on the decentralized ecosystem of “money legos” built on Ethereum. Compared to crypto mining, yield farming is an innovative way to earn rewards with cryptocurrency holdings using permissionless liquidity protocols.

While both yield farming and crypto mining involve mining pools, liquidity providers are the prominent elements which differentiate yield farming from crypto mining. 

Beyond the shared, decentralized peer-to-peer network, what further differentiates yield farming is its resemblance to the borrowing and lending plan involving governance tokens to yield rewards. Furthermore, crypto mining aids the introduction of new coins into the existing supply by mining a block to hash each transaction taken from the memory pool individually.

Ultimately, yield farmers and crypto miners share the same goal of earning incentives by deploying unique strategies to maximize yields.

Simply stated, liquidity mining means giving liquidity to accrue tokens, while obtaining governance rights represented by the token. The curious amalgam of liquidity and mining gives rise to liquidity mining, favoring DeFi's prospects. While the dissection of liquidity involves the supply of coins or tokens, mining takes account of the PoW computation power to receive new tokens minted by the algorithm. For example, an avid investor can supply liquidity by staking in a liquidity pool like Uniswap to earn a dividend of 0.3% swap alongside newly minted tokens upon each block’s completion.

Yield farming, however, is a liquidity movement across DeFi platforms that utilizes different mechanisms, including fund leveraging and liquidity mining, to maximize returns. At the same time, yield farmers maximize their gains by moving funds from time to time with different strategies. These could range from yield farming roots to increasing liquidity for Synthetic ETH tokens (Synthetix) or using the 100% APR approach to supercharge earnings by leveraging loans to borrow tokens that yield Compound. 

Ultimately, both liquidity mining and yield farming differ, even though they're used interchangeably since they both maximize returns through earning governance tokens. 

Yield farming allows token holders to generate passive income by locking their funds into a lending pool in return for interest. While staking involves a validator who locks up their coins, these can be randomly selected by the PoS protocol at specific intervals to create a block. 

Staking usually involves a larger amount of crypto to boost the LP's chances of being selected as the next block validator. Depending on the coin maturation, it can take up to a couple of days before staking rewards materialize. 

In contrast, yield farmers move digital assets more actively to earn new governance tokens or smaller transaction fees. Unlike stakers, yield farmers can deposit multiple coins into liquidity pools across several protocols. For example, yield farmers can deposit ETH to Compound to mint cETH, then deposit that into another protocol that mints third and fourth tokens.

Compared to staking, yield farming is more complex, and the chains can be hard to follow. Though yield farming has a higher return rate, it's also risker.

Anyone who invests expects a return, and yield farming is no exception. As we discussed earlier, yield farmers earn rewards by lending in the liquidity pool, but this also sparks a discussion about whether or not yield farming is profitable. 

Generally, yield farming’s returns are calculated annually. That means you can expect an average return over the span of a year. However, the profitability of yield farming is rather complicated, as it depends on the capital you deploy, the strategies you use, and of course, the liquidation risk of your collateral. 

On the bright side, since yield farming is still in its early stages, those who decide to stake their cryptocurrencies into protocols can expect significant returns. While the profitability is uncertain, some successful yield farming techniques are circulating in the crypto world with 

. With the continuous growth of active users in DeFi, the ROI for tokens with governance rights could be a massive hit in the years ahead. 

It's hard to estimate the returns of yield farming, even for a short term period. Many factors contribute, including volatility in yield farming and relentless competition. Let’s use the demand and supply concept to justify the idea: If one yield farming strategy becomes overpopulated, then returns will naturally dwindle.  

Nevertheless, calculating the ROI of yield farming is still possible despite its limitations. Here’s an overview of the standard metrics.

APR doesn't consider compounding, which means the calculation only involves the multiplication of the periodic interest rate by the number of periods within a year. The yearly return rate is imposed on borrowers but is paid to capital investors. 

 involves the return rate imposed on capital borrowers and then paid to capital providers rather than investors. Compounding interest, however, is taken into account to increase investors' returns.

Basically, the main difference between these two metrics is that APR doesn't consider compounding, while APY describes the return rate with compounded interest.

Every investment possesses some threats, and yield farming is no different. Yield farming is indeed profitable early on, but continued profit requires extensive strategic planning. In most cases, the most profitable yield farming strategy involves a highly complex process. It also requires considerable capital to deploy different investment tactics.

In fact, if you’re unaware of the risks it comes with, you’re likely to encounter the following threats:

Increased chance that collateral will be liquidated

In order to take a loan, you’ll need to collateralize some assets. Depending on the protocol, some borrowers are required to over-collateralize, mainly to allow some room for position adjustments in the market whenever there’s a sudden market crash. While some lenders require little to no collateral, this is precisely why it’s essential to take the collateral ratio into account to avoid liquidation. 

For example, you can only borrow an asset if you deposit according to the collateral ratio of 400%. Therefore, when your collateral value is $1,000, you can only borrow $250. The higher the collateral ratio, the less you can borrow. It’s best to avoid liquidation by adding more collateral from the actual asset you intend to borrow.

Loss of assets due to smart contract glitches

Yield farming relies on smart contracts to bind two anonymous parties’ farming transactions without an intermediary. This means that when there’s manipulation, or error in the central data, participants can fall victim to system failure such as leaks of financial information and the loss of funds. 

The farmed token might grow considerably in value, but its value could plummet as well. While DeFi is hyped because of public interest, its future is uncertain. Ultimately, value drops whenever the trend dies down or there's an oversupply of tokens in the market.

Lack of assurance, since DeFi is a highly composable system

DeFi is based on the idea of composability: Each building block comprises components which can be combined differently according to user requirements. This concept is essential in eliminating third-party involvement, thereby making the protocols seamless and permissionless. The downside is that when a block experiences a malfunction, the entire ecosystem shares in the losses as well. 

It can't be said that yield farming is entirely safe. Like everything else, investment takes time, effort and extensive research. As with any other endeavor, there's danger ahead for those who fail to appreciate the ideology behind it.

However, all this can be prevented by simply reading and understanding the terms of a smart contract. Try to be less reliant on outsourcing third parties to interpret the contract, and instead know the contract’s ins and outs so that you can detect any potential scam. However, do note that smart contracts are vulnerable to system bugs. This means that if the system fails, you risk losing staked funds or values of a token in the protocol.

While some crypto enthusiasts believe DeFi and/or yield farming possess boundless growth, volatility is still a part of it all, giving rise to speculation of another crypto bubble. Ultimately, when investing, you should weigh your financial position and your capability to go out of your comfort zone in order to reach logical decisions.

It’s clear by now that farmers earn incentives by providing liquidity to a platform. Interest and fees vary, depending on the capital growth and the strategies you deploy. The inevitable question is: Which protocols can help you diversify your yield?

), Uniswap uses an AMM to swap two trustless cryptocurrencies into a fund pool. In exchange, the liquidity provider earns a 0.3% fee when liquidity is provided for each swap. 

The Compound token (COMP) is granted to users who borrow and lend crypto assets with it. This approach is one of the simplest and most popular strategies. Anyone with an ETH wallet can supply assets to the COMP liquidity pool. The challenge here is to determine the token's expected value, while allocating sufficient liquidity to maximize returns. 

The great thing about yield farming is that you can stake yields to generate more profits. Let’s say an LP receives a token minted by an algorithm: Re-staking it based on the other protocols will yield a third token.

Here’s are some of the platforms that support these protocols.

According to the algorithmic interest rates, lenders who deposit funds will receive aTokens and immediately earn compounding interest.

Balancer adopts similar protocols like Uniswap to allow LPs to allocate funds to the pool. However, LP can disregard the fixed fund allocation on Uniswap by allocating custom funds. 

As stablecoins optimize swaps, Curve functions like Uniswap, except that it allows users to make higher-value swaps with lower slippage rates. For example, a Curve token can be staked on Synthetix to yield sETH with the underlying minted token, then redistributed to another staker. 

Since yield farming is built upon Ethereum, the computation effort needed to execute a transaction or smart contract execution is inevitable. And to do so, you need Ethereum Gas.  Ultimately, the more complicated a protocol is, the more gas is required to execute a transaction.

In short, gas is used to calculate the fees to pay within the network to perform a transaction. Let’s say you intend to interact with Synthetix; you’ll need more gas to transfer any of the SNX because the protocol is more intricate than others.

The debt pool represents the total value of the tokens you've funded in the platform. Taking Synthetix as an example again, when you stake by minting sUSD, you’ve already claimed a portion of the debt. 

So, if a majority of SNX holders hold sETH while ETH soars, then the debt pool will increase proportionally. That means you'll need more funds to unlock the SNX again. Let’s say you minted 1,000 sUSD, and the total circulation of Synths is at $1 million; your debt ratio is standing at 0.1%. You’ll need 1,000 sUSD to 

, while the unlock rate doubles as the prices of Synths doubles as well.

Calculating your short-term profit with APY can be misleading — and confusing. Since yields are usually based on the expected return for a year, the APY percentages in the short term aren't sustainable. Looking at a farming reward that only lasts a few days with a volatile rewarding system, APR’s actual calculation is doubtful.

What Does the Future Hold for Yield Farming? 

Since they first rolled out, DeFI and Yield Farming have shaken up the internet. With over a million active users in this ecosystem, it’s impossible to see what the future holds. Will there be newer, more value-adding and cutting-edge applications to revolutionize yield farming and DeFi in general? Only the future can tell. 

What Is Yield Farming in DeFi and How Does It Work?

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