This is a short post on how to get started yield farming (earning yield on your cryptocurrency) with yearn finance.
Already know you want to yield farm but not sure how? Just scroll on down to “How To”.
What is “yield farming”?
Yield farming is the term used to describe chasing different strategies with your capital in order to achieve the highest yield on that capital. The term was popularised during the crypto DeFi summer of 2020.
Why stablecoins?
The price of a stablecoin is pegged to a particular asset, the most popular are USD pegged assets. There is a variety of USD pegged coins, such as USDC, USDT and DAI, all with slightly different (de)centralisation and pegging models.
I will use USDC . Even though USDC is more centralised than something like DAI (I’m generally pro anything that is more decentralised), I already have enough in decentralised assets (such as BTC and ETH), and my goal was to have something with a similar risk model to my bank account, but with the advantage of being able to leverage the DeFi yield models.
Why would I yield farm?
If you have capital, denominated in any asset, and you don’t wish to sell that capital, then why not earn more of that denominated asset? For example, if you own Ethereum (the second largest cryptocurrency) and you don’t want to sell your Ethereum since you think the price will continue to rise, you can earn more Ethereum by depositing it into a number of lending platforms such as Aave or Compound, or providing liquidity into an AMM such as Uniswap. There are different risks involved in these strategies, but that’s out of scope for this post.
Yield farming earns more yield than simply lending. As of writing, Yearn’s USDC vault is earning ~16.60% /year, compared to lending USDC in Compound at 3.29% interest. Another reason to choose USDC over DAI is the DAI vault is earning 11.77% / year.
Why Yearn Finance?
While there are a number of yield farming platforms available to choose from now, Yearn is one of the most public, popular and, as a result, is probably the most audited. So you can be sure that the smart contract risk (the risk that the code that implements the yield strategy isn’t hackable / that your money is stolen) is lowest.
How To
This is not a guide on cryptocurrency wallet security. Never share your seed phrase with anyone. Always back up your seed phrase.
- Purchase USDC. USDC is a very popular token, and is available on nearly all cryptocurrency exchanges. If you’re looking to purchase with AUD, Independent Reserve is a good bet.
- Sign in to Metamask.
- Send your USDC to your Metamask wallet or connect your wallet to Metamask.
- Head on over to yearn.finance and then to “Vaults”
- Connect your wallet.
6. Click “Show” on the USDC vault (there may be two, select the one with the highest yield)
7. Click “Approve” this is basically to give permission to the contract to do with your funds as it likes. This cost me ~ $30 in Ethereum transaction fees.
8. After the approval transaction is confirmed, that button should now show as “Deposit”. You can then click Deposit and deposit as much USDC as you like. This transaction cost me ~$60 in Ethereum transaction fees.
DONE! You are now earning over 15% on your monies. Better than the average 7% on stonks, and arguably safer given it’s USD pegged!
Note that, I spent about $90 USD in Ethereum gas fees. So, it’s best to move a large enough amount such that this amounts to a small percentage of the value, since the fees are the same no matter how much you are moving.
How to track your gains?
I’m yet to find a way to track your yearn gains that are good enough to recommend, they’re all pretty shit. Let me know if you have one, otherwise keep an eye on this post, because I’ll edit it in when I find one.
