What is cryptocurrency farming and how much can you earn from it?
Passive income has always been one of the most discussed topics; any investor wants to get maximum profit from their investments with minimal risk.
Thanks to such an asset as cryptocurrencies, new options for passive income appear every day; one of these options can be called cryptocurrency farming.
I myself became interested in this topic, and I decided to check how much you can earn if you farm on the listing of a new cryptocurrency.
But first, let’s try to figure out what this new type of income is and whether it’s really worth doing.
Cryptocurrency farming is a relatively new, but rapidly gaining popularity way of making money in the field of digital assets.
Cryptocurrency farming, also known as "yield farming" or "liquidity mining", is the process of generating income by contributing one's cryptocurrency assets to a liquidity pool.
Market participants, known as farmers, invest their assets and, in return, receive rewards, usually in the form of transaction fees or new tokens.
The basic principles and mechanisms of pharming can be reduced to several key points.
First, cryptocurrency farming relies on the use of decentralized finance (DeFi) platforms that allow users to engage in asset exchange, borrowing and lending without intermediaries.
Secondly, the effectiveness of farming is determined by factors such as current reward rates, gas costs (transaction fees on the Ethereum network and some other blockchains), and the overall stability of the DeFi ecosystem.
Finally, a key feature is the time aspect: some farming strategies require active participation and constant reorientation of assets to optimize profitability.
In the context of making money, the potential of cryptocurrency pharming can be quite significant, but it also comes with increased risks. Possible income depends on:
- Amount of invested assets.
- The chosen pharming strategy.
- Fluctuations in market rates and prices for cryptocurrencies.
- Ability to adapt to changes in the DeFi ecosystem.
In simple words, we can say that the essence of the process comes down to the fact that you invest money and receive a reward for it. You can join the process on such crypto exchanges as:
- Binance,
- Coinbase
- KuCoin,
- Crypto.com
In theory, everything looks quite nice and promising, but let’s see what the situation with earnings is like using a real example.
How much can you earn from cryptocurrency farming?
On the Internet you can find stories that people earn hundreds of percent per annum by farming cryptocurrencies and almost become millionaires. Perhaps this was the case before, as soon as this method of earning money appeared, now the situation is a little different.
About a week ago I decided to take part in farming such a digital asset as Saga (SAGA). The name of this cryptocurrency didn’t mean anything to me, I was just wondering how much profit an amount of 1000 US dollars would bring.
It was decided to conduct the experiment on Binance, since I already had an account on this exchange and an application on my phone. What you need to do to get started:
- Buy one of the cryptocurrencies on the exchange - BNB or FDUSD
- Then in the mobile application select Earn and Launchpad
- Then deposit BNB or FDUSD by clicking on the “Start Staking” button
- The process lasts 4 days, rewards in the form of coins are credited daily
After I started staking Saga (SAGA), I was credited with about 3 coins for three days of staking. After the listing and the opportunity to sell the coin became available, its price was 7 US dollars.
That is, when selling three coins, I received 21 US dollars, which is 2.1% of the 1000 dollars I invested.
On the one hand, it’s not bad, but you still had to exchange the previously purchased BNB and FDUSD back into USDT at the market rate, so to speak, to feel the result.
After the exchange, I had 1013 USDT in my account, that is, the result of a three-day investment was 13 dollars or 1.3%
Conclusion: Farming is profitable, but you should not expect extra profits from this activity; new coins are listed only a few times a month, so in the future it is unlikely that you will be able to earn more than 4-5% profit per month.
At the same time, you should not forget about the risks that lie in the fall in the value of BNB or FDUSD, because first you buy one of the cryptocurrencies, and upon completion you sell again. Due to exchange rate differences, I lost about 0.8% while farming Saga (SAGA).
If you decide to engage in pharming professionally, then it is better to hedge exchange rate risks with cryptocurrency brokers by opening unsecured sell transactions on BNB or FDUSD.