The words DeFi, Farming, and Staking should be familiar in the digital finance world, but in fact there are many people who still wondering “What is DeFi?” or “What is farming and staking? And how to do that?”. But don’t worry! Because in this post we would like to explain you about DeFi, Farming, and Staking in a very simple way so everyone –especially new users– can understand it easily.
What is DeFi?
DeFi or Decentralized Finance is a financial system such as Bank. In general, DeFi is a place for users to do deposits, loans, and financial transaction. However, DeFi doesn’t need the third party intervention because everything is done automatically via Smart Contract on BSC (Binance Smart Chain). So, no one has a control over the collected deposits and all the funds are saved securely on the Smart Contract.
Liquidity Provider for AMM
Liquidity Provider is a market maker that determines price of a token so that the token have certain value in the market. For example, there is a BNB-USDT market that has a Liquidity Provider of 100 BNB + 10,000 USDT, it means the price of BNB is 100 USDT.
Why is Liquidity Important?
The more liquidity on a market means the more stable the market is. It means will be more difficult to pump or dump a price of a token. In general, Liquidity Providers will get rewards from the transactions that happened on that market, the rewards usually about 0.3% from the transaction volume and will be distributed fairly to all the people who added Liquidity on the market.
How to Add Liquidity
Adding liquidity is done directly by the wallet users to the smart contract , there is no third party intervention that will take your funds. When you adding liquidity, you needs 2 tokens with the same value. For example, for BNB-USDT-LP market you need to have same BNB and USDT value, example 1 BNB worth $300 and USDT worth $300 and you will get TOKEN-LP (a kind of liquidity stock) from the market.
In short, farming is making a liquidity on a market and getting TOKEN-LP, then you need to deposits that TOKEN-LP to a DeFi Project. After that you will getting rewards, the amount of rewards is depend on provisions of each project.
Staking is depositing certain tokens to DeFi project and get rewards in a certain token too. Each DeFi project has different reward amount.
How much rewards from farming or staking?
From hundreds defi project, each project has different rewards value. The rewards usually about 20% to 500% per year, and one of the advantage from Defi project is we could make withdrawals anytime without having to wait one month or one year. We can make a deposit in the morning andr make a withdrawal in the afternoon, as flexible as it is.
Is it safe to deposits TOKEN-LP to DeFi?
DeFi running on smart contract and the smart contract are visible to public. Anyone can reads the code and understand the flow of the balance in and out of it, but maybe it’s too difficult to understand for beginners. So, smart contract audit services are available to determine whether the project is safe or not. In brief, DeFi is safe when the project has passed an audit.
How big is the chance of profit at DeFi?
The chance is very big, many DeFi projects provides huge returns up to 100% per month.
How to start it?
Okay now we will try to do a step to start staking and farming on DeFi. The token we will use is WBST token and the DeFi project we will use is kindcow.finance. The steps are:
1. Download Trustwallet on Android Playstore.
2. Send WBST and BNB Smart Chain to Trustwallet
3. Open kindcow.finance via DAPP trustwallet.
4. Go to page app.kindcow.finance/pools
5. Deposit WBST to the pool (start staking).
6. Done! You will starting receive reward after 3 seconds.
7. You can harvest reward or unstake anytime you want.