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Yield Farming: The magic of making more crypto by saving crypto

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Yield Farming
Source: Robopay (Image was modified)

As more and more innovations infiltrate the cryptocurrency space, a new term is often created to identify the innovation and the practise of the innovation. 

Yield farming is the hottest new term in the crypto space right now. Simply put, yield farming is a way of earning crypto with the crypto you have already. It involves lending money out to others, the lending process is backed by smart contracts and in return for the service of lending you earn crypto. There are far more complexities to yield farming but lending and commission is the whole idea behind the concept.

Yield farming grew out of the DeFi (decentralized finance), DeFi, which is also one of the relatively new buzzwords in the crypto space, brings more features of traditional banking to the digital sphere of crypto. Features like borrowing and lending are some of the upgrades in the world of crypto.

How it started

On the 14th of June, an Ethereum-based credit market called Compound, began distribution of its token known as the COMP token. The COMP token is a governance token, its live distribution was so successful that the platform reached $600 million in Total Value Locked (TVL). This made compound a big name in the world of decentralized finance. The large sale of these governance tokens got people interested in Compound. As a result, putting crypto that would have otherwise been sitting idle in a wallet, at the disposal of Compound, meant fairly high returns

What are tokens?

Crypto tokens are also digital currencies but they are quite different from actual crypto currencies. Tokens are also called crypto assets, they are special types of assets within the blockchain of a particular cryptocurrency. They can be used within the blockchain of that crypto currency. Sometimes, they are used as ICOs (Initial Coin Offering), like buying shares of a company, crypto tokens are like money that can be used for specific purposes within an application. They are like getting voucher cards on an online shopping platform, but can only be used on that platform. Just like shopping vouchers, tokens can be used as reward systems for network participants.

Tokens are built over an existing blockchain, so, unlike an independent crypto like Ethereum, tokens cannot stand alone. Whilst ETH is an independent currency of the ethereum blockchain, ERC20 is a token built on top of that blockchain.

Again, governance tokens differ slightly from regular crypto tokens.  this governance tokens, give holders power to make changes to the governance parameters

How exactly does yield farming work?

Yield farming is essentially putting your crypto in a credit based market like compound and expecting returns. Yield farming involves liquidity providers and liquidity pools. The liquidity providers are the yield farmers who put their crypto in liquidity pools where others can lend the crypto. By using this service a cost is incurred, the liquidity providers are then paid from the amount incurred by the users of the service. The payment depends on their stake in the liquidity pool. 

All these activities are done with smart contracts on the ethereum blockchain. The smart contract decides the specifics of the interaction between lenders and borrowers. It decides how much interest the borrower pays.

Funds deposited into the liquidity pools are usually stable coins pegged to the dollar, as it is easy to track profit and losses with them. Cryptocurrencies like ETH can also be used. Profits on yield farming are annualized. Essentially, what has been earned can only be evaluated after a year.

Is yield farming a guaranteed profit making venture?

Yield farming is a complex process and can be very risky. Yield farming works best when there is enough capital to put in. Some suggest that it is a venture best for whales, who have a very deep supply of capital. Yield farming involves reading of smart contracts and other complex activities, a lack of understanding of these activities will most definitely lead to a loss. 

Volatility could also cause losses, if there is a sharp drop in price of the stake put in a liquidity pool, the value of the stake drops lower than the initial amount put into the stake. 

Yield farming is still a new niche in the world of crypto and DeFi, although it has been profitable for some, it will go through a series of evolutions before it becomes profitable for many.   

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Bolu Abiodun is a recent graduate of Theatre and Media Arts, Federal University Oye-Ekiti. A journalist with over a year's experience on the job. A former editor at American Media company Project Forward, he is a skilled content creator, social media manager and digital marketer.

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Bitcoin

The Great Mining Migration from China to the U.S. Explained

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Bitcoin mining

Coming off the heels of China’s now infamous crypto crackdown, the mining rate in the U.S. has now surpassed that of China for the very first time. With a hashrate – a term used to describe collective computing power of miners around 35.4% in July, the hashrate in the U.S. is up 428% compared to September 2020.

In a move dubbed the “great mining migration“, miners in China had been moving towards more crypto friendly countries since May, when the Chinese government called for a crackdown on bitcoin mining and trading. Some of the locations thought favorable enough to entice mining operations include Central Asia, Eastern Europe, the U.S. etc.

However, it is important to bear in mind that mining operations are extremely energy taxing. For said reason, many of the bitcoin miners who had migrated to the U.S. set out for the U.S. state of Texas, one with one of the lowest energy prices in the country. Another favorable advantage for miners moving to Texas is the crypto-friendly political atmosphere regarding cryptocurrencies.

A criticism often levelled at bitcoin mining is that it is bad for the environment and certainly so seeing the enormous amounts of energy bitcoin mining requires, most of which is supplied from fossil fuels. The mining migration has brought about a trend where miners are actively seeking out renewables and or nuclear power, especially in the U.S. Miners are now clustering around states such as Washington, New York and unsurprisingly Texas.


The U.S. is not the only country to have benefitted from the aftermath of Beijing’s anti-crypto policies. Kazakhstan, the central Asian nation has also seen its share of the global hashrate grow with current levels around 18.1%, just behind the U.S. However, many believe that the Central Asian nation is just a junction on the larger trend of miners moving westward. Also, considering that most of Kazakhstan’s energy is derived from coal and a new law to further tax crypto miners in 2022, It stands to reason that many mining operations will eventually migrate from Kazakhstan.

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Bitcoin.org gets hacked, scammers run BTC giveaway scam

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Earlier today, Bitcoin.org, the oldest cryptocurrency website registered by the founder of Bitcoin, Satoshi Nakamoto, recently got hacked. Scammers ran a BTC giveaway scam with a promise to return double the amount users send to the named address. In the end, the scammers were reported to have collected $17,764 before the website was taken down. The website was inaccessible for a few hours after the incident, but normal service has been resumed.

To bring users’ attention to the hack, a pseudo-anonymous Twitter account with the name Cobra took to Twitter to reveal the news and claimed that the website may be offline for some days. He also clarified through his tweets that Bitcoin.org has never been hacked and that the breach must have been due to a lapse on the part of Cloudflare- the web provider that the website is hosted on.

“Bitcoin.org hasn’t been hacked, ever. We move to Cloudflare, and two months later we get hacked. Can you explain where you were routing my traffic too? Because my actual server didn’t get any traffic during the hack” he tweeted.

The scam on the website was perpetrated through a giveaway. Visitors on the website were greeted with a popup, asking them to send crypto to a Bitcoin wallet via a QR code and receive double the amount in return. The fake message showed that the Bitcoin Foundation was giving back to the community and that the giveaway will be limited to the first 10,000 people. This was made to draw more people into the scam.   According to an analysis on the scam address done by Reddit Sleuth, it was presumed that a chunk of the 0.4BTC came from the scammers themselves to add an element of credibility to the claim. At the time of writing this report, Bitcoin.org is once again, back to life.

How popular is the Bitcoin giveaway scam?

Bitcoin giveaway scam is quite popular among hackers as it allows them to make fast money without tampering with anyone’s wallet. In 2020, Twitter handles of top crypto celebrities, politicians and influencers were hacked to run Bitcoin giveaways. While the scammers were apprehended, the value of Bitcoin was not affected.

Today’s scam on Bitcoin.org did not affect the price of the coin either. Despite the Evergrande debt crisis and the fluctuations bedevilling the crypto market within the week, Bitcoin increased by 2.05% within the last 24 hours, thereby moving from $42,789 to $44,378.

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Crypto prices drop as global market fear increases

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Top cryptocurrency prices have fallen amidst a drop in stocks and fears over China’s Evergrande debt crisis. In the last 24hour, Bitcoin dropped from $47,772 to $42,630 shedding about 8.58%. this is the lowest in price since another bull run began on Sept 5 after the April crash.

El- Salvador’s President, Nayib Bukele sees the fall as an opportunity to invest more. Recall that the country adopted Bitcoin as a legal tender on September 7. Despite the adoption, the price of Bitcoin has fallen by almost 14% since then.

Other coins have experienced dramatic crashes within the last 24hours. Solana, a coin that has experienced 355% growth within the last 3 months fell from $162 to $130 shedding about 11.39% within the last 24hours. Solana’s fall may be categorized by the 17-hour outage which the founder, Anatoly Yakovenko said was caused by bots “flooding the networks”

Ethereum fell by 9.37% while Dogecoin and Axie Infinity fell by 11.22% and 14.14% respectively within the last 24hrs hours. While crypto experiences dark Monday, El-Salvador keeps investing more money in Bitcoin.

A look at the global market

The global market is experiencing fear due to the Evergrande debt crisis. A report published by the University of Michigan shows that consumer’s sentiment is beginning to decline. This trend alone may impact the crypto market as well.

On the other hand, the global market downturn must have been spurred by the Evergrande debt crisis. The company grew to be one of China’s biggest companies by borrowing more than $300bn. Last year, Beijing made rules to control the debt owed by big real estate developers. This led Evergrande to offer its properties at major discounts to raise more money to keep the business afloat. Right now, the company is struggling to meet the interest on payment of debts.

Why would it matter if Evergrande fails?

The collapse of the multi-million dollars company would affect the global market; including the crypto market. Many people bought properties from Evergrande and they expect to make gains. If Evergrande falls, crypto investors will be forced to withdraw more money to keep their business running without the means to invest more. When one business fails, the other gets affected indirectly. This also applies to other firms that do businesses with Evergrande.

The potential impact on China’s financial system is another effect of Evergrande’s fall. In his statement to BBC, Mattie Berkink, the Economist Intelligence Unit (EIU), said that “the financial fallout would be far-reaching. Evergrande reportedly owes money to around 171 domestic banks 121 other financial firms” if the company fails, other lenders or businesses may be forced to lend less. Thereby leading to a credit crunch- a situation where companies struggle to borrow money.

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