KuCoin is considered the top cryptocurrency exchange throughout the globe. The services and features KuCoin offers keep them separate from other competitors. Their exchange is the solution to all activities in the crypto world, including Bitcoin cloud mining. One of the most important steps of KuCoin is to provide more transparency to their user. Even you can open your KuCoin account without sharing your detail. However, this account has some limitations due to some security purposes. In this article, we also discuss KuCoin’s decentralized exchange new financial system, which builds around us.
Yield Farming New Way Of Decentralized Finance
During shopping on different websites, you must give your details to complete your purchase. Even on the internet website, the owner has your information, and they may use it for different advertisement purposes. On the other hand, decentralized finance (Defi) enables you to borrow or lend money without sharing your details. This is one of the advanced features of yield farming you enjoy on KuCoin.
How Yield Farming Works
In this feature of KuCoin, users are named (LPs) who add funds to liquidity pools. These pools work as a marketplace to provide money for borrowing and lending purposes. The LPs get rewards in various ways depending on the funds they add. LPs may receive interest, transaction fees, or different tokens for their investments. Some tokens received from interests are also invested back in the pool.
Importance Of Collateralization In Defi
Collaterals act as insurance for money borrowed in loans. Different over-collateralization systems are present to increase liquidity in a market crash. The main goal of such a system is to protect the maximum assets of pool investors. This will also help to build trust among newcomers in the crypto market.
Protocols Of Yield Farming
People mostly used Compound, an Ethereum-based decentralized lending app. LPs can use this app to lend their money and earn interest on the lending money. Anyone with an Ethereum wallet can invest in the pool. This compound app enables people to borrow money for groceries and other stuff. However, they must add crypto funds as collateral to borrow money.
Risk Attached To Yield Farming
Yield farming is not simple as it seems. It is quite riskier for both borrowers and lenders. Many traders sometimes lost their funds due to the volatile market. You must understand the whole ecosystem first. Also, it is based on Ethereum so take care of the gas fee perfectly. Otherwise, lots of money will be loose during borrowing.
Conclusion
KuCoin target is to open more doors of opportunities for every trader in f the crypto market. This Yield Farming is one of the advanced features they introduced on KuCoin. However, these features are highly efficient in less volatile markets, which we easily predict from BTC prices. Many long-term traders make good money with the help of this feature. Similarly, the high volatile market increases the risk of Yield Farming, and many investors lose their confidence.
