How to reduce risks in production agriculture of decentralized exchanges

Since 2020, the DeFi industry has been gaining momentum, providing a new perspective for the financial world and providing investors with a new way to make money.

Essentially, DeFi, also known as decentralized finance, is an application and service ecosystem built on a public blockchain.

Currently, income farming and mortgages in the DeFi market are gaining momentum.

Agriculture, but yield

Income agriculture, often referred to as “liquidity mining”, is a profitable way to make money using the cryptocurrency you already have.

In short: You use smart contracts to lend your crypto assets to a decentralized platform without an intermediary, and get rewards for it.

This process is the so-called Automated Market Maker (AMM) model, but in encryption: it involves liquidity providers, users and liquidity pools that deposit their assets, and all assets that can be traded on a decentralized exchange.

In most cases, liquidity providers obtain governance tokens by depositing their encrypted assets.

This process is similar to how a bank loan works: the bank lends money to a person and expects it to be repaid with interest. Through income agriculture, crypto investors behave like banks.

DeFi doesn’t always mean safety

Although DeFi is a good way for investors to make money, especially if they use complex strategies such as borrowing money from a decentralized platform and collateralizing it elsewhere at a percentage lower than the yield, it is not as you might think So safe.

Since this technology is decentralized, a single technical error may endanger the entire blockchain, the so-called “domino effect.” Given that blockchain transactions are irreversible, you may lose all your assets.

Another major issue is volatility. During peak periods of volatility, the money you borrowed from the smart contract may be liquidated, leaving you with nothing.

Use stablecoins

This is why DeFi companies use stablecoins as their liquidity pool.

Stablecoins are linked to the value of U.S. dollars or commodities, which makes them much less volatile than other trading pairs. For newcomers, stablecoins may be a safer way to try to leverage high-yield agriculture.

Some companies provide both digital currencies and stablecoins to expand the base of potential investors and provide more security for liquidity pools.

One of these companies is Kalmar, A DeFi bank with a range of products, including leveraged interest and NFT fundraising activities.

Kalmar uses leveraged stablecoin farming with funds provided by other users, which, according to the company, can achieve annual returns of 40% to 90%.

The platform provides an opportunity to use leveraged high-yield agricultural products through Binance Coin (BNB) or its equivalent stable currency BUSD or both.

Kalmar said that investors can control their private keys by integrating browser wallets such as Metmask, Math Wallet, WalletConnect, Binance Chain Wallet, SafePal APP Wallet and Trust Wallet.

Disclaimer. Cointelegraph does not endorse any content or products on this page. Although we aim to provide you with all the important information that we can obtain, readers should do their own research before taking any actions related to the company and take full responsibility for their decisions, and this article cannot be regarded as investment advice.

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