Introduction

Yield farming is becoming increasingly popular among investors in Decentralised Finance (DeFi). When done right, yield farming can generate exceptional profits, but there are also associated risks. Let’s dive a little deeper and see what yield farming is all about.

Yield farming is the investment in cryptocurrencies or tokens via decentralized apps (DApps) as Spectrumswap yield farm platform to maximize profits. A proficient yield farmer can not only gain profit from price appreciation in their holdings, but also from yield generated by these holdings.

By locking assets in liquidity pools such as the ones found on Spectrumswap, investors can generate passive income.

Most of the yield farming on DeFi is done via liquidity pools. A liquidity pool is a smart contract that holds on to and locks the cryptocurrencies/tokens of investors. Liquidity providers contribute to the liquidity of a trading pair pool, such as Spectrum-BNB, by depositing their crypto (Spectrum and BNB) in the pool, receiving LP (Liquidity Pool) tokens in return.

The Annual Percentage Yield (APY) of a liquidity pool generally gives a good indication how much trading fees can be earned in a pool. However, note that these rates are not fixed, and change daily based on historical trading data from the pool.

In addition to the previously mentioned ways of making profit, a yield farmer also benefits from price increases of the token that he is using to farm. This is a double-edged sword: value can be lost as the price of the token declines.

Kindly remind, please always Do Your Own Research! Only Invest what you can afford to lose.

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