Active users will often use various DeFi platforms to optimize returns on their deposited funds. Here are the top most popular yield farming methods.

Aave

Aave is an open source, decentralized borrowing and lending protocol for creating a money market where users can borrow assets and earn compound interest on lending in the form of AAVE tokens (formerly LEND). Aave has the highest locked TVL among all DeFi protocols, reaching over $21 billion in August 2021. Users can earn up to 15% APR for lending on AAVE.

Compound

Compound is a money market for lending and borrowing assets where algorithmically adjusted compound interest as well as COMP governance tokens can be earned. It is tested and reviewed to ensure the highest level of security. Total supply is over 16 billion USD in August 2021, and APY ranges from 0.21% to 3%.

Curve Finance

Curve Finance is a DEX that allows users and other decentralized protocols to exchange stablecoins with low fees and low slippage using its unique market-making algorithm. It is the largest DEX in terms of TVL, with over $9.7 billion locked. Base APY can increase up to 10%, while bonus APY can increase more than 40%. Stablecoin pools are generally safer because they don’t lose their fixed value.

UniSwap

Uniswap is an extremely popular DEX and AMM that allows users to swap almost any pair of ERC20 tokens without the need for a middleman. Liquidity providers must stake both sides of the liquidity pool 50/50 and, in return, earn a percentage of the transaction fees as well as the UNI governance token.

There are two direct versions-Uniswap V2 and V3. The latest version, Uniswap V3, is a growing protocol ecosystem with over 200 integrations. TVL is $5 billion for V2 and over $2 billion for V3, as of August 2021.

Instadapp

Instadapp is the cutting-edge platform to leverage the potential of DeFi. Users can manage and build their DeFi portfolios, and developers can build DeFi infrastructure using their platform. As of August 2021, more than $9.4 billion is locked on Instadapp

SushiSwap

SushiSwap is an offshoot of Uniswap, which has caused a huge buzz in the community. It is currently a DeFi ecosystem, with a multi-chain AMM, a lending and leveraged marketplace, onchain mini dapps, and a launch pad. TVL on the platform was $3.55 billion in August 2021.

PancakeSwap

PancakeSwap is a DEX built on top of the Binance Smart Chain (BSC) network to swap BEP20 tokens. PancakeSwap uses an automated market creation model (AMM) where users trade with a liquidity pool. It has the highest TVL among BSC protocols, with over $4.9 billion locked as of August 2021. It focuses heavily on NFT gambling, lottery, auction and collectible features. APY can go as high as over 400%.

Venus Protocol

The Venus Protocol is an algorithm-based money market system that aims to develop a lending and credit system based on the Binance Smart Chain. Users provide collateral to the network and earn an APY for lending, while borrowers pay interest.

Venus is different in its ability to use the collateral provided to the market not only to borrow other assets but also to mint synthetic stablecoins. These synthetic stablecoins are backed by a cryptocurrency pool. In August 2021, TVL will be worth more than $3.3 billion.

Balancer

Balancer is an automated portfolio management and trading platform. Its liquidity protocol distinguishes itself through its flexible staking. It does not require lenders to add liquidity equally to both pools. Instead, liquidity providers can create custom liquidity pools with different token ratios. Over $1.8 billion was locked in August 2021.

Yearn Finance

Yearn.finance is an automated decentralized aggregation protocol that allows productive users to use various lending protocols such as Aave and Compound for the highest yield.

According to the Yearn finance algorithm, it will look for the most profitable yield farming services and use the recovery method to maximize their profits. Yearn finance made waves in 2020 as its YFI governance token surged to over $40,000 in value. Users can earn up to 80% APY in Yearn and have $3.4 billion locked in the protocol.

Yield farming’s Potential and Difficulties

As DeFi and Yield Farming continue to gain popularity, users will turn to opportunities where they can transact at a reasonable cost and quickly.

Within the Ethereum ecosystem, several layer 2 (L2) scaling solutions such as Arbitrum, Optimism, and zkSync are currently growing and providing ultra-cheap and ultra-fast transactions. These L2, which inherit security directly from Ethereum and regulate fees in ETH, will become central to enhancing productivity because of their strong scalability.

Furthermore, alternative scaling solutions like the Polygon sidechain, which explicitly caters to Ethereum users, will remain prominent as more DeFi users start yield farming across multiple chains and L2.

Perhaps the biggest difficulty that yield farming faces comes from the management agency. As updated reports, the SEC has threatened to sue cryptocurrency exchange Coinbase for allowing customers to earn interest on depositing digital assets, prompting the company to suspend the product until at least October 2018.

SEC Chairman Gary Gensler said that the agency could focus on investigating decentralized financial projects. Or in July, an article in the Wall Street Journal also criticized “yield farming” on DeFi as a scam.

The move is also likely to cause concern among companies such as BlockFi Inc., Gemini Trust Co., and Celsius Network, which have provided services that allow customers to earn interest on lending their tokens. Not long ago, the US state of New Jersey asked BlockFi to stop marketing certain lending-related products.

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