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What Is Yield Farming and Compound? Tactics and Higher Returns

Yield Farming Analyst Altnotes

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Yield Farming with Compound

“Yield farming” is a new iteration of cryptocurrency mining and staking that allows entities to earn an interest rate well above that of a typical US bank account. Below is a scenario detailing how an investor can use yield farming with Compound, a decentralized finance (DeFi) platform that allows users to exchange stablecoins and Ethereum tokens amongst each other.

Step 1: Start with $10,000 DAI and deposit it into Compound. One will start earning the 2.21% supply APY (annual percentage yield) for DAI and the supply APY 9.72% from Compound, returning $1,183 per year.

Step 2: Borrow 50% USDC with the DAI supply, pay a borrow APY of 5.69%, and earn a Borrow APY of 10.69%, which creates a net of $250 a year. With this, take that $5,000 of USDC and convert it to DAI and repeat the process again.

*** Repeat Steps 1 & 2 with a lower starting value

Step 3:  Start with $5,000 DAI and deposit it into Compound. One will start earning the 2.21% supply APY for DAI and the supply APY 9.72% for Comp token, totaling $591 a year.

Step 4: Borrow 50% USDC with the DAI supply, pay a Borrow APY of 5.69%, and earn a Borrow APY of 10.69%, generating a net of $125 a year. Take that $2,500 of USDC and convert it to DAI and repeat the process again.

The yield farming interest rate one would see in this scenario would be 21.49% rate, returning $2,149 a year with this simple trick.

By Jacob Stelter

Disclosures: Not investment advice. It should be assumed that Sarson Funds or its affiliated managers hold positions in all projects that are discussed. It is not possible to invest in any project directly through Sarson Funds, Inc. or its affiliated managers. Any investment product offered by managers affiliated with Sarson Funds should be assumed to be only available to Accredited Investors and subject to the individual terms and conditions of that offering including but not limited to those eligibility requirements associated with U.S. Securities Regulation D, section 506c. Talk with your financial advisor before making any investment decisions or have them contact Sarson Funds directly at info@sarsonfunds.com

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