Web3 loves buzzwords, and one of the buzziest words in DeFi is yield, a common term that refers to the return you can earn on your crypto.
Yield works like interest from a bank: You make a deposit, your money sits in an account for a while, and then the bank pays you interest on that amount.
Yield in web3 works much in the same way: You deposit your assets into a decentralized exchange (DEX) or DeFi application, but instead of interest, you earn rewards typically paid out in the form of tokens.
In this article, we’ll explore how you can generate yield, its benefits, potential risks, and how Spool mitigates those risks by providing you with some of the best returns in Web3.
Earning Rewards Through Yield Farming
One of the most popular ways to generate yield is through yield farming — the process of depositing cryptocurrency into a DEX or protocol to provide it with liquidity while receiving payouts from the platform accessing your crypto.
Many people believe that to yield farm, they must lock up their assets within a blockchain protocol by staking, but staking is just one way that users can earn a return on their crypto.
Instead of locking your crypto assets on one exchange or platform, yield farming allows you to deposit your crypto holdings into a DeFi protocol pool, providing the pool with the liquidity to lend and trade with other DeFi projects. As your holdings are used for DeFi activities, you begin earning tokens and rewards.
Risks of Yield Farming
While yield farming can be a great way to earn passive income on top of your crypto positions, it’s not without risks. As the market has its ups and downs, the size of your rewards and returns fluctuates. Because the cryptocurrency industry is ripe with volatility, it’s impossible to predict the projects that will endure and those that will inevitably wither and decline.
No matter how promising a particular protocol looks today, it could be defunct in the next six months. Part of the risk with yield farming — and crypto in general — is understanding and accepting that your funds could be used to help support a project that ultimately flops.
Yield farming also relies on smart contracts. Bugs or other vulnerabilities within the contacts could allow for a loss of funds or open the door for hackers to exploit the weaknesses. For this reason, conducting your own research before depositing any of your crypto assets into a yield farming operation is essential.
And that’s where Spool comes in. Instead of trying to understand all the different DeFi protocols, Spool provides an easy-to-use solution that automatically transacts your assets across trusted protocols, eliminating the need to submit multiple transactions or spend hours determining if a protocol is legitimate.
Mitigating Yield Risks with Spool
Wouldn’t it be great if you could simply deposit crypto into a DeFi app, begin earning rewards on your deposit, and trust that your positions are being monitored? With Spool, they are.
Trusting your tokens with Spool means you don’t need to be a crypto DeFi expert to enjoy the benefits of yield farming. All you need is a crypto wallet, an asset balance, and an Internet connection to start earning rewards and returns. Spool’s automated strategies make it easy for any crypto holder at any level to generate passive income by helping users hunt for the best yield farming returns across an array of DeFi protocols without paying network fees.
Safety and security are the utmost priority for Spool and its products. Spool’s success is driven by your financial success, so when you deposit into Spool, you can trust it’s vetted the large assortment of DeFi protocol activities your liquified crypto will be participating in. Spool’s technology seeks the best smart contracts for your investments, saving you the headache of attempting to understand them.
Earning Yield with Spool
Imagine taking your extra cash and giving it to a company that can help you multiply it by giving that cash to a bunch of other companies that will use it for financial activities like trades and other transactions that generate fees. That’s what Spool does with your cryptocurrency, except its automated technology finds you the protocol activities with the best returns.
Whether you’re staking your crypto or liquefying it into a DeFi pool, Spool has the potential to help your assets reach their potential.
Check out Spool to see how you can amplify the return of your yield initiatives and start earning extra revenue on your cryptocurrency positions.
