I know, I know, the Publish0x competition for Harvest Finance is over, the winners have been declared, and the prizes have already been given out. But after reading so many of the great entries, I decided to check out Harvest Finance myself and was quite impressed with what I found. In this article, I'd like to give a brief overview of yield farming and how it applies to cryptocurrency, but I'd also like to show the way in which Harvest Finance simplifies this process and makes yield farming easier for the average everyday users like you and I.
Maximizing Investing Returns
One of the fundamental concepts of investing is that so long as other things are equal, investors will prefer to earn more on their assets as opposed to earning less. Therefore, investors tend to move funds from locations with low interest rates to locations where they can earn a higher interest rate. The same is true in cryptocurrency. With cryptocurrency, it's incredibly easy and fast to move funds from one decentralized financial lending protocol to another. For example, if Compound Finance is giving me a 5% interest rate and Fulcrum offers 7% it's easy to move my funds to the higher interest-paying protocol.
However, it's not all that simple. Recently, many DeFi lending protocols have introduced governance tokens. These governance tokens are given out as a reward for people lending funds on the platform and have value in their own right.
Therefore, determining where to lend different fun isn't as simple as comparing the stated yield on different platforms. Investors also have to take into account the value of the governance tokens that they will receive in exchange for lending their funds. On one hand this is good because it allows someone who has a good sense of the market to maximize their profit by lending their funds on the most lucrative platform . On the other hand, this can be extremely time-consuming and even if someone has perfect knowledge of which protocol has the highest total return, they will have to spend a significant amount of gas fees constantly moving funds chasing the highest yield.
Harvest Finance has been created with the goal of “automatically farm[ing] the highest yield available from the newest DeFi protocols, and optimizes the yields that are received using the latest farming techniques.”
In other words, Harvest Finance removes a lot of the manual labor aspect of moving your own funds from different DeFi protocols and takes care of that automatically. This is a huge time-saver for people who simply want to invest their money and don't want to constantly follow the cryptocurrency markets. Not only does it remove the complexity of yield farming, it also reduces the gas fee that users have to pay.
With Harvest Finance, users can earn returns in two different ways. The first way is by simply depositing an asset and receiving the tokenized “f” asset in return. For example, USDC deposited with Harvest Finance gives the user “fUSDC” which is an interest-bearing asset similar to Compound's cUSDC tokens.
Simply depositing an asset and receiving the appropriate f token is sufficient to allow the user to begin earning rewards. However, it is possible to further increase the total return on Harvest Finance by staking “f” tokens that a user has received. For example, a user who has swapped USDC for fUSDC can then stake that fUSDC and begin earning Farm tokens.
Thus, the total return a user can earn on harvest in is a function of both the return on the underlying asset as well as the accumulation of farm tokens.
Although it is important for a cryptocurrency project to have strong fundamentals, I think generating buzz and excitement is just as important for onboarding new users and encouraging adoption. That's one thing that I think Harvest Finance does a great job of. Everything from their memes to their cartoon graphics and even the design of the website really capitalizes on the whole “Farmer Chad” imagery. It makes the project seem fun and exciting which is one of the main reasons that I decided to check it out.
The crypto ecosystem is already awash with different DeFi protocols and new projects, so it takes something really intriguing to stand out and capture users' attention. I think Harvest Finance does a good job of that . Not only does Harvest Finance have the “fun factor”, but it also appears to have a well-thought-out plan that brings new value to the marketplace as well. Any cryptocurrency project that wants to succeed in this competitive environment needs to have a unique value proposition (automated yield farming) but also find a way to capture users attention in a crowded Marketplace (Farmer Chad). I believe that Harvest Finance has both of these going for it.
Due to high ETH gas fees, I haven't personally been able to put any crypto into Harvest Finance, But I look forward to doing so as soon as gas prices drop and it becomes a more cost-effective proposition. Not-financial advice. a