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DeFi Yield Aggregators: What They Are and How They Work

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Table of Contents

  1. YIELD FARMING: A QUICK OVERVIEW
  2. HOW DO YIELD FARM AGGREGATORS WORK?
  3. BENEFITS OF USING A YIELD FARM AGGREGATOR
  4. THAT'S WHERE YIELD FARM AGGREGATORS STEP IN. 
  5. UNDERSTANDING APY VS. APR
  6. GETTING STARTED

Yield aggregators - The words are on many crypto investors' lips, but few people understand how they really work and why they are revolutionizing investing in the DeFi space. 

DeFi has rocketed in growth over the last couple of years as blockchain technology presents new, more efficient and secure peer-to-peer dealings that eliminate intermediaries from the borrowing and lending process.

Bitcoin.com reported that in April 2022, 'the total value locked (TVL) in DeFi had risen to $231 billion.

That's some serious cash. 

Let's take a closer look at yield aggregators, how they work and see why they have become so popular over the last couple of years. 

YIELD FARMING: A QUICK OVERVIEW

Yield farming generates users a passive income by providing liquidity, in the shape of cryptocurrency deposits, to DeFi liquidity and staking pools. Investors lock up their money in a participating DeFi app, and over time the project automatically pays these "yield farmers" in crypto rewards. 

Mainly, there are two types of yield farming opportunities: Liquidity Pool farms and staking farms. In both cases, investors deposit cryptocurrency into smart contracts.

In a liquidity pool farm, users deposit crypto into smart contracts that create liquidity pools. In exchange for deposits, DeFi apps reward users with tokens you can use to retrieve your underlying deposits at any time, including any interest accrued through trading fees.

Staking involves investing coins via smart contracts in farms that make up a staking pool. Rather than being a decentralized trading pair, a staking pool is something like a decentralized vault for a single kind of asset, securing your deposits rather than facilitating trades. 

HOW DO YIELD FARM AGGREGATORS WORK?

Yield farming aggregators automate staking and collecting the generated rewards on behalf of users, to optimize gas fee spending via different strategies. These strategies involve moving tokens around different platforms and maximizing yields via auto compounding.

BENEFITS OF USING A YIELD FARM AGGREGATOR

Investing without the benefits of using an aggregator can be a challenging and time-consuming user experience, which typically starts with swapping your tokens and takes you through depositing them in liquidity pools to staking into distribution contracts before you can claim and sell rewards. This is not a straightforward process for the uninitiated, and repeating these steps can mean giving up your valuable time while having pricey gas fees eating into your capital.

THAT'S WHERE YIELD FARM AGGREGATORS STEP IN. 

Yield farming aggregators automate investing in yield farms by collecting the generated rewards on behalf of users to optimize gas fee spending via different strategies. These strategies involve moving tokens around different platforms and maximizing yields via auto compounding.

All you have to do is simply deposit and withdraw your coins. Yield aggregators take care of everything else. They also include hundreds of farms and vaults that generate profits from dozens of different decentralized services with a variety of business models. 

Here's a quick recap of some of the main benefits of using yield farm aggregators:

  • Generate you a passive income
  • Give access to a wider range of investment products
  • Give you instant access to your funds 
  • Generally have easier onboarding processes

UNDERSTANDING APY VS. APR

In the DeFi ecosystem, returns are calculated as either an Annual Percentage Rate (APR) or Annual Percentage Yield (APY). 

So what’s the difference? 

APR tracks how much interest a depositor will earn on their crypto over a year. If the APR on offer is 15% and you deposit $1000, you'll have a total of $1,150 after one year. 

APY differs in the sense that it tracks how much a deposit will earn in a yield farm annually if the interest earnings are reinvested regularly. 

GETTING STARTED

Starting your yield farming and staking journey is easy with platforms like Bolide. Simply visit Bolide.fi, connect your crypto wallet, and deposit $USDT / $USDC / $DAI or $BUSD, and start enjoying the following benefits:

  • Low risk, market-leading yields of up to 30% APY
  • Earn an extra 20% staking your BLID tokens and enjoy 11% APY on farming 
  • Start investing with any amount
  • Hands-off, passive automated investments using your stablecoins 
  • No lock up period access your funds and profits instantly
  • No withdrawal limitations

Start earning interest at the speed of light with Bolide Finance's high yield farming aggregator today → bolide.fi

For more information follow our official community channels:

Twitter - https://twitter.com/Bolide_fi

Telegram - https://twitter.com/Bolide_fi

Discord - https://discord.com/invite/bolide

Reddit - https://www.reddit.com/user/bolide-fi

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