Many people in DeFi lose money from traditional yield farming. Decentralized finance, sometimes called DeFi, introduced a thrilling wave of financial innovation that enthralled people worldwide. Yield stands out among the several instruments available in DeFi as the most intriguing.
The return provided by DeFi projects was exceptional; some of them boasted annual percentage yields of hundreds of thousands of percentage points (APY). This sparked a frenzy in pursuit of the most significant yield, today referred to as "yield farming."
Everyone wanted to be a yield farmer, from inexperienced retail investors to experienced institutional players. But in the middle of the frenzy, consumers lost sight of where the yield was coming from and was instead taken in by the exorbitant APYs.
The Goal of Traditional Yield Farming
Yield farming aims to bring liquidity to DeFi protocols by rewarding users with yields. This can be done via lending money on money markets, lending liquidity on AMMs, staking tokens, or bonding and staking rebase tokens.
Nevertheless, these strategies frequently have a short lifespan and draw investors with limited perspectives hoping to earn a quick profit, which causes sustainability problems.
Conventional yield farming draws "liquidity locusts," who shift from protocol to protocol in search of greater rewards until they run out of resources.
The conventional methodology of rewarding liquidity providers with governance tokens or token inflation is unsustainable since it causes a wave of mass exodus once the incentive pool runs dry or when holdings become diluted.
This results in a reflexive feedback loop that rises quickly and falls faster.
Although income creation appears to be the solution, protocols that use it may still suffer from temporary loss and excessive incentive spending.
Additionally, the interconnected nature of the cryptocurrency markets hurts traditional yield farming, limiting yield potential everywhere during market downturns.
These issues are still looking for a solution.
Introduction to Real Yield
Crypto actual yield as a metric compares a project's offered yield against its revenue. If the returns for staking are more significant in real terms than the provided interest, the emissions are dilutionary.
This means that their yield is not sustainable or, in lay terms, "real." Real yield is not necessarily better than dilutionary emissions, often used for marketing. However, this is useful for gauging a project's long-term yield-bearing prospects.
LandX and Real Yield
Consumers can invest in the income produced by farmers, and LandX is helping change yield farming. Farmers receive xTokens through a revenue-sharing arrangement put on-chain as an NFT, which can then be sold to DeFi investors looking for yield.
In proportion to their xTokens, these investors receive cTokens, which can be exchanged for USDC. The beautiful thing about this strategy is that yield is paid out of the money the farmer makes from selling his crops; it is not reliant on token incentives or inflation.
Real Yield is reliable and unaffected by conditions in the larger crypto market. It's time to stop playing short-term, unsustainable games and start investing in real estate on LandX for a consistent, inflation-resistant dividend.
Final Thoughts
The move to real yield and revenue is essential for the sustainability of good, working, decentralized protocols operating in DeFi. We must celebrate these achievements and enjoy the yield with peace of mind.
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