Will DeFi Yield Farming Affect the Public Perception of Cryptocurrency?

Making money in the cryptocurrency industry requires a very different approach. Using innovative solutions, such as DeFi yield farming, can be successful, but also risky. In terms of mainstream adoption, these options may not trigger a sudden “crypto rush” right away.

DeFi Yield Farming Explained

The concept of yield farming is akin to a savings account, in a way. Users will put their wealth at the disposal of someone else to earn rewards from doing so. With a savings account, users can obtain interest rates from their bank. Not the greatest option these days, with so many banks maintaining negative interest rates at all times.

With yield farming, there is — in theory — no negative reward. Providing liquidity through supported crypto assets will always yield some reward. The value of these rewards can fluctuate wildly and result in a net loss, however. Moreover, the value of one’s provided liquidity fluctuates as well, which is inherent to the cryptocurrency industry.

The difference between the two is how decentralized finance does not require middlemen or meddling. Liquidity providers can verify the code of any project and determine whether they want to contribute. Even so, there is no guarantee. There will always be the smart contract creator who can make changes or affect liquidity in different ways.

Can it be Trusted?

That is a big problem when innovative concepts arise. Similar to anything else related to cryptocurrencies, there are no guarantees. Nor is there recourse if something were to happen to one’s funds. Stolen money may never be returned. A developer exit scamming will have little to no consequences either.

Trusting the code is not an advisable course of action either. The bottom line is to verify, rather than trust. Aping into something people are talking about on social media is a guaranteed way of losing money. With yield farming, verifying aspects is not difficult. There are ways to do so even without being a developer.

Unfortunately, there is still the risk of running into a scam. DeFi is still a very new industry, and growing pains are part of the growth process. Numerous tokens have come and gone as far as yield farming in concerns. Some of them manage to stick around, whereas others disappear into obscurity. Always conduct research before making any financial decisions.

Unfortunately, the DeFi industry has recently seen a fair few “rug pulls” New tokens are issued on Ethereum, liquidity is added to Uniswap, and the creators cash out after a few hours. Recent incidents include SYFI, SushiSwap, and several others. Addressing these problems will not be easy, but it is evident that something needs to be done sooner rather than later.

The Impact on Public Perception

It is safe to say the general public doesn’t think highly of cryptocurrency. Despite Bitcoin’s successful track record, the associated volatility remains a hurdle to entry. Even with nearly guaranteed yearly value increases, the average person on the street shows no real interest in it. When it grants access to traditional financial services and products, that situation may change eventually.

At this time, there are nearly no DeFi projects for Bitcoin users, let alone any that may provide somewhat reliable yield farming. Changing this narrative is crucial. For now, all projects focus on Ethereum. If this helps to weed out the shady projects and any growing pains before bringing decentralized finance to Bitcoin, all the better.

One also has to wonder if Bitcoin holders even want to engage in yield farming. Bitcoin has the power to appreciate in value under its own power. For Ethereum and other altcoins, barely anything happens unless Bitcoin starts to move up. As such, yield farming and DeFi may not be beneficial to Bitcoin at all. Not in its current form, anyway.