Staking and Farming: Part Two

Farm It Out

What is Liquidity Provision?

Impermanent What?!

Rake It In

Compose Yourself

  • Some of your token is sent to a lending protocol and used as collateral to borrow another token
  • The new token is sent to a pool and used in liquidity provision with your original token
  • The LP tokens are staked in order to earn a governance token
  • The governance token is then used to purchase more of your original token
  • Liquidity pools are located on smart contracts and so run the risk of being hacked
  • Impermanent loss can obliterate your liquidity if one of the tokens is very volatile
  • Yield farming on newer projects might result in a complete loss if the developer rugpulls
  • If you have loans on borrowing platforms the maximum loan to value ratio needs to be respected or you run the risk of having your collateral liquidated

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