What is Real Yield farming?

Real Yield Farming are rewards that accompany investing in a project. It can be actualized through several means such as, through staking, lending, borrowing and providing liquidity.

It is always tempting to be a part of any investment with profitable yields and interest, however, it is important to look before leaping. Which will lead us into talking about "how to ensure that the yield is real", that is, good to ensure that what you're about to invest will be profitable and sustainable.

How to ensure that the DeFi yield is real?

1.Spot a project that offers trusted real yields.

This serves as the best starting point for earning a profitable yield. It also gives an understanding about the project's mechanism.

2.Have a look at the project's yield potential and how you can partake or participate in it.

Some projects could require you to stake its governance token,others could require liquidity.

Going further, let's talk about the various strategies for yield farming, which includes:

1.Staking

2.Lending

3.Borrowing

4.Providing Liquidity

1.Staking

This involves locking up your assets for a certain period of time in order to acquire future free tokens.

This is equivalent to fixed deposits of traditional finance/banks,where you lock up your funds for some time and get interest in the long run.

2. Lending

Lending is the process by which you provide assets for borrowers in a lending pool. That is, you offer to lay your assets down for others to use, and then you get interest in return.

Protocols appreciate lenders by giving them some percentage of the interest paid by the borrowers and a share of the generated revenue.

3.Borrowing

When an individual takes a loan from a lending protocol in order to purchase another asset, we can say that an individual has participated in Borrowing.

Yields are earned through borrowing as a result of the assets that are used as collateral to get the loan.

For instance,an individual borrows a certain amount of assets from XYZ protocol. That individual will get paid as a result of the interest from his collateral. This is because his collateral has also been used to lend out to others.

4.Providing liquidity

Liquidity provision is one of the ways by which yield is earned. It involves providing liquidity to a protocol in order to ensure the smooth running of operations. In return,the protocol appreciates such investors with some percentage of the generated revenue.

Inasmuch as yields can be earned, there are risk factors to consider when farming yields and they include:

1.Rug pulls

2. Smart contract vulnerabilities

3. Impermanent loss

4. Market volatility

5.Security Risk