Investing in DeFi? Bet on diversification, not short-term gains

Investing in DeFi? Bet on diversification, not short-term gains


The decentralized finance space has grown exponentially over the last few months, to the point where more than $9 billion worth of crypto assets were locked in its protocols before crypto prices started dropping. The space had a little over $500 million locked in back in September 2019.

This exponential growth in the last few months appears to be mainly related to a yield farming trend that started when lending protocol Compound began distributing its COMP governance token to users who interacted with the protocol.

Put simply, yield farming — or liquidity mining — allows DeFi users to generate rewards with their cryptocurrency holdings by interacting with protocols that distribute governance tokens. Farming yield can be a profitable venture on its own, but the tokens being farmed often see their price surge as well.

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One of many examples of this is YFI, the governance token of Yearn.finance, a site that helps users find the best yields in DeFi protocols.

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