Home DeFi & NFT Decentralized Finance (Defi) Yield Farming Automated Market Making and Profits From Lucrative Bubble

Decentralized Finance (Defi) Yield Farming Automated Market Making and Profits From Lucrative Bubble

DeFi AMM

Decentralized Finance (DeFi) has caught up with so much of the craze because, just like bankers earn interest on money, strangers will be able to earn money by lending their value to others. The demand for liquidity never dies.

Anyone who is having some value can lend their liquidity through financial services. Users do this by staking the value of their Euro, USD or other fiat to a digital currency.  This digital currency is also known as cryptocurrency is lent to apps.  The lending is not to people or companies in many cases.

Smart contracts control the transactions in the app.  Some of these apps are those who are in need of maximum liquidity and they mostly deal with decentralized exchanges who are automated market makers. 

There are several types of automated market makers (AMM). Those who have money to invest in Defi are interested in putting their money at the right place.  This means they will be a part of a Defi community. Some time ago, many felt that it was not practical to decentralize cryptocurrency exchanges, but dApp on several exchanges yield excellent returns for investors in DeFi.

AMMs are already reputed and well known among those in the investment circle. For clarity, Automated market makers (AMMs) are part of the decentralized finance (Defi) ecosystem. They allow digital assets to be traded in a permissionless and automatic way by using liquidity pools rather than a traditional market of buyers and sellers.

In short, AMM is the system that provides the liquidity which is needed for the cryptocurrency exchange and the entire process takes place through the process of automated trading.

When the price of a listed asset in the exchange looks acceptable, then a trade is executed and it becomes a market price.  The use cases for Defi are still getting developed.

When it comes to trading Defi Assets, “users will be able to trade on non-custodial decentralized exchanges like Uniswap, SushiSwap, and Bancor for either long-term or short-term holds. Most people will be investing by buying low and selling high if such an opportunity arises and market conditions are clear.”

The entire purpose of Defi is yield farming, which is the process of staking or lending crypto assets to create high returns or rewards, which in turn is in the form of cryptocurrency. However, there are many who feel that yield farming is a lucrative bubble in the world of Defi. It just looks like it is great in terms of profit-making for investors and it is here to stay.

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Maheen Hernandez

A finance graduate, Maheen Hernandez has been drawn to cryptocurrencies ever since Bitcoin first emerged in 2009. Nearly a decade later, Maheen is actively working to spread awareness about cryptocurrencies as well as their impact on the traditional currencies. Appreciate the work? Send a tip to: 0x75395Ea9a42d2742E8d0C798068DeF3590C5Faa5

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