In the realm of decentralized finance (DeFi), yield generation stems from various sources, with the most common being:
Moreover, platforms may incentivize users with their native tokens as a bonus for platform engagement. Your overall performance hinges on the yield you accumulate and the performance of the crypto assets you employ. Generating yield by leveraging DeFi is typically called “Yield farming”. Although there are plenty of DeFi platforms where you can generate triple-digit yields by providing liquidity, they tend to require a more in-depth analysis since most of them expose you to the risk of impermanent loss and other more advanced topics.For now, we will focus on the most vanilla applications of DeFi — generating yield denominated in stablecoins.We’ll start by exploring one of the most compelling avenues for passive income in DeFi: Yearn.fi. At the moment of writing, stablecoin vaults on Yearn were earning 14–20% APY.So if you are looking to earn money with your crypto by generating yield, you will find a step-by-step explanation below.
Yearn is a decentralized application (dApp) built on the blockchain. It functions as a decentralized asset management platform where users deposit their idle crypto assets into diverse algorithmically managed investment strategies, often referred to as “vaults,” to earn yield.These vaults strategically allocate users’ assets across different DeFi protocols to maximize returns. Yearn achieves this through automated compounding of token rewards and “profit switching,” wherein funds are dynamically shifted between DeFi protocols to capitalize on the highest interest rates available. You can find in-depth explanation here.Launched in 2020 and with around 240M USD in assets under management, Yearn is the biggest yield aggregator in the market.
The simplest way to use Yearn is by depositing in the stablecoin vaults. Today we will do a step-by-step on how to deposit your first 100 EUR on Yearn.
Because liquidity farming requires us to move assets between platforms somewhat frequently to ensure we are always farming the best yields, we will select the following:
In this tutorial, I recommend installing Zerion on your mobile device so you can easily manage your assets on the go. If you already have a wallet installed, skip this step.
You will have to acquire some if you don’t have USDT yet.
There are multiple platforms out there that allow you to buy crypto directly into your wallet. You can use a tool developed by Bleap to compare the prices across different providers.
To buy USDT with no fees with Bleap, you just need to download the app and follow the steps:
During this step make sure you have selected USDT on Polygon on the asset list.
Once you finish the in-app flow, go to your bank app and make a transfer to your dedicated account details. Ensure you copy the reference provided in the app. USDT will land directly in your selected wallet.
Gas fees are an integral part of the blockchain. They are transaction costs that users pay to execute operations on the network.
On the Polygon network, gas is paid in MATIC. If you don’t have any MATIC in your wallet, you will have to buy some. In this operation, you will spend less than 0.10EUR in MATIC, so if you have any amount above that should be enough.
Once your deposit has landed, you can repeat step 3 but select MATIC on the Polygon network this time.
Start by navigating to: https://yearn.fi/v3, to use yearn brand-new vaults. Click on the top right screen on “Connect Wallet”.
Select “WalletConnect”.
Scan the QR code with your mobile wallet.
After connecting your wallet to Yearn, select the Vault you want to deposit your USDT in. We will select the USDT vault on Polygon.
After selecting the USDT vault, we select the amount — 100 USDT — and click “Approve”.
You will notice that you are trading 100 USDT for 90.594398 ysUSDT-A. Don’t worry, it’s still worth 100 USDT. Think of it as your deposit receipt to redeem the USDT back once you want to withdraw it.
You should have a request in your mobile wallet to approve Yearn to spend 100 USDT from your wallet. Click “Confirm”.
Once you approve Yearn to spend 100 USDT from your wallet, you need to make the deposit. On Yearn website, once it confirms you have approved the transaction click on “Deposit”.
You should have a request in your mobile wallet to approve the exchange of 100 USDT for yvUSDT-A . Click “Confirm”.
All done. 🎉
Sit back and let DeFi compound your money for you.
Risk Disclaimer: DeFi Investing
Investing in DeFi protocols carries significant risks, including:
Volatility: Prices can fluctuate rapidly, leading to potential gains or losses.
Smart Contract Risks: Vulnerabilities in smart contracts may result in financial losses.
Regulatory Uncertainty: Changing regulations may impact the legality and value of DeFi assets.
Impermanent Loss: Providing liquidity exposes investors to temporary losses.
Market and Platform Risks: External factors and platform issues can disrupt trading activities.
Loss of Funds: There’s a risk of partial or total loss of invested funds.
Information Risks: Misinformation may lead to suboptimal investment decisions.
This information is provided for educational purposes only and should not be construed as financial advice. Investors should conduct their own research (DYOR) and seek professional advice if necessary before making investment decisions.
