Yield farming of cryptocurrencies is one of the many ways to earn interest from idle cryptocurrency assets. The main concept is that by lending your digital assets to a liquidity pool, you will receive an attractive rate of return on your funds.
In this guide, we review the best cryptocurrency yield farming platforms for 2022 in terms of interest rates, security, blockchain terms, supported tokens and more.
Review of the best cryptocurrency platforms for Yield Farming
We analyzed the best cryptocurrency yield farming platforms for 2022 and found that the best providers on the market offer a good balance between security, attractive returns and reasonable blockchain terms.
We also considered factors related to user-friendliness, customer service and supported tokens.
1. Aqru - the best Yield Farming platform for 2022
If you are looking for the best way to Earning interest on your dormant cryptocurrencies, we found that Aqru stands out in this market. By opening an account with this provider, you will have the opportunity to earn up to 7% in interest on the cryptocurrencies you buy, hold or transfer.
Moreover, unlike most cryptocurrency yield farming sites, Aqru allows you to earn the aforementioned high yield without locking up your tokens for a minimum period of time.
On the contrary, Aqru offers flexible accounts so you can request a withdrawal at any time. In addition to Bitcoin i Ethereum, Aqru cryptocurrency accounts also support UDSC and USDC Maple. While you can earn over 3% on USDC without a lock-in period, USDC Maple offers an annual interest rate of over 7% with a 90-day lock-in period.
Aqru is able to offer such attractive rates of return because it provides cryptocurrency loans to both retail and institutional borrowers using your deposited funds.
Another thing we like about Aqru is that the platform supports deposits in fiat currency. This means that you can start make money from cryptocurrencies, even if you don't currently have any digital tokens. What's more, Aqru offers mobile cryptocurrency app for phones with Android i iOS, so you can access your account at any time.
What we like about Aqru:
✔ Attractive interest rates over 7% on USDC Maple
✔ Secure interest rates on Bitcoin and Ethereum
✔ No lock-up period (except for USDC Maple product)
✔ Great reputation
2. eToro - A regulated platform offering tools for investing in cryptocurrencies
If your main priority when searching for the best sites for yield farming is security, look no further than eToro. Although this platform - regulated by the SEC, ASIC, FCA and CySEC - does not offer conventional yield farming services as such, eToro allows you to earn passive interest.
This is made possible by an automatic staking tool that generates income as long as the tokens are in your eToro account.
At the moment, eToro offers services cryptocurrency stakings Cardano, Ethereum and Tron. There is no requirement to lock your tokens for a minimum number of days, as all eToro interest-bearing tools are offered on a flexible basis.
This suits people who may need access to their cryptocurrency assets at short notice. In addition to its strong regulatory status and institutional-grade security tools, we also like eToro for its low-cost brokerage and exchange services.
For example, eToro allows you to buy cryptocurrencies on a spread-only basis, starting at $10. What's more, there are no fees for depositing funds in U.S. dollars, or for storing tokens in an eToro cryptocurrency wallet.
eToro is also a popular option for mobile device users, as it cryptocurrency wallet application The provider allows you to exchange tokens on more than 500 pairs. And finally, eToro offers a copy trading service that allows you to trade cryptocurrencies in a 100% passive way.
What we like about eToro:
✔ Regulated by SEC, ASIC, FCA and CySEC
✔ Automatically earn interest on supported tokens
✔ Withdraw your tokens at any time
✔ It also supports spread-only cryptocurrency purchases and copy trading tools
3. Crypto.com - A great platform to earn high interest on stablecoins
If you are looking to get the highest possible interest rates on cryptocurrencies - without worrying about volatile price spikes, consider Crypto.com. This top-rated provider allows you to get an APY of up to 14% when depositing stablecoins such as Tether and USDC into your account. However, there are some factors that determine the exact amount of APY you will receive.
For example, to get the full 14% APR for Tether, you must lock in your tokens for three months. A stake of no less than 40,000 CRO tokens is also required. On the other hand, if you deposit Tether without staking any CRO tokens and on a flexible withdrawal basis, then the interest rate drops to 6%. Therefore, Crypto.com offers different rates of return to meet different requirements.
Accordingly, Crypto.com offers more than 250 profitable digital currencies - most of which are not in the stablecoin category. This includes all cryptocurrencies, from Bitcoin, Ethereum and Litecoin to Solana, Shiba Inu and Decentraland.
Again, the amount of interest you can earn will depend on the lock-in period and whether you want to put up CRO tokens. Nevertheless, Crypto.com also offers a popular mobile app that allows you to access your account no matter where you are.
What we like about Crypto.com:
✔ Supports more than 250 cryptocurrencies
✔ Attractive interest rates
✔ Increase interest rates by staking CRO tokens
✔ Trusted by more than 50mil users, the platform
4. BlockFi - a popular platform for Yield Farming with Bitcoin
BlockFi, one of the best cryptocurrency platforms, offers a range of services related to cryptocurrency investments. When it comes to earning interest, the platform offers reasonable interest on both stablecoins and traditional cryptocurrencies.
As for the former, you can earn an interest rate of up to 9.25% when you deposit Tether into your BlockFi account. This interest rate is paid up to the first $20,000T deposited in the account and without a lock-in period.
If you are looking for a profit on your Bitcoin investment, the highest rate offered is 4.5%. This rate is paid up to the first 0.10 BTC deposited. After that, the rate drops to 1%.
Ethereum is slightly more competitive at 5%, although it is only paid out up to the first 1.5% of ETH. In terms of security, BlockFi keeps a significant portion of clients' digital funds in cold storage. Moreover, digital tokens are stored on leading third-party exchanges - such as Gemini.
BlockFi also has an insurance policy to protect against the potential threat of remote hacking. In addition to cryptocurrency income services, BlockFi also offers traditional trading accounts.
This allows you to buy and sell digital currencies at competitive fees. Therefore, once you purchase cryptocurrency assets on the BlockFi platform, you can start generating profits right away. BlockFi is also known for its top-notch customer service, which includes telephone support.
What we like about BlockFi:
✔ Specialized service for making money on cryptocurrencies
✔ Large number of supported tokens
✔ No lockout periods
✔ Highest stablecoin interest rate
5. Coinbase - Top rated Yield Farming platform for beginners
Coinbase is one of the world's largest cryptocurrency exchanges in terms of the number of user accounts - the platform currently supports tens of millions of traders. You can easily buy cryptocurrencies with a debit or credit card, and the Coinbase trading platform itself is ideal for beginners.
Once you have cryptocurrencies in your Coinbase account, you have the opportunity to start earning interest.
This is offered through an automated staking tool that has no lock-in period. Since Coinbase has only recently entered yield farming cryptocurrencies, for the moment the platform only supports six tokens.
These include Cosmos (5%), Tezos (4.63%), Ethereum (4.5%) and Algorand (4%). Stable coins include Dai (2%) and USDC (0.15%). Although Coinbase is ideal for beginners, the interest rates offered are much less competitive compared to other platforms.
On the other hand, Coinbase offers some of the best security protocols in this space, which include cold storage, two-factor authentication and IP/device whitelisting.
What's more, Coinbase is not only a regulated entity in the US, but the company now trades on the NASDAQ exchange. Coinbase is also a good option if you want to create a diversified cryptocurrency portfolio, as the platform supports more than 50 digital tokens.
What we like about Coinbase:
✔ US regulated entity
✔ No penalties on withdrawals
✔ Deposit funds in cryptocurrencies or fiat money
✔ Ideal for beginners
What is Yield Farming?
Yield farming of cryptocurrencies , also known as liquidity mining involves staking or lending your cryptocurrency holdings to generate passive returns and earn rewards. Decentralized finance, or DeFi for short, has recently gained popularity with features such as liquidity mining.
How does yield farming for cryptocurrencies work?
In its most basic form, when you use yield farming cryptocurrencies, you do so in order to get interest on their cryptocurrencies.
In many ways, this is similar to putting money into a traditional savings account, which offers an annual percentage yield (APY) on your funds.
But make no mistake - not only is the concept of yield farming cryptocurrencies far more complex than a traditional savings account - but the risks are also far greater. To learn more, keep reading our yield farming guide.
Therefore, in the following sections we will explain the basics of yield farming so that you have a good understanding of how this niche sector works.
Yield Farming - the basics
At the beginning of your yield farming journey, you will need to deposit funds on your chosen platform. In turn, the digital tokens will then be deposited with a liquidity pool provider, via a smart contract.
Consequently, yield farming does not require an intermediary to generate income, as the smart contract operates in a decentralized manner.
Liquidity pool, in which cryptocurrency funds are deposited, allows the borrowing of capital. This can be used for speculative purposes or in many cases - as a way to access liquidity.
After all, newly introduced digital tokens often require an additional level of liquidity in order for buyers and sellers of a project to have access to liquid market conditions.
APYs - that is, interest rates per annum
As for how much you can earn using yield farming, it depends on a number of factors. The most important of these is the right digital token for which your funds provide liquidity.
For example, if a smart contract provides liquidity for a newly introduced cryptocurrency that has a small market capitalization, then very attractive APY yields are likely to be offered.
In fact, it is not unusual for such tokens to offer triple-digit returns.
On the other hand, if you are depositing funds into a cryptocurrency pool that provides liquidity for an established and large capitalization project, expect APYs to be much lower.
This is a classic example of the risk-reward relationship, as the higher the APY return, the more price volatility is to be expected. More on this subject later.
Trading pairs yield farming
Another important thing to know about yield farming cryptocurrencies is that each liquidity pool exists as a trading pair.
As a basic example, let's say a smart contract deposits funds into a BTC/ETH pool.
In this way, you ensure liquidity for both Bitcoin and Ethereum, which in turn ensures that sufficient capital is available on this trading pair.
In this example, liquidity is likely supplied to an exchange that offers a market for trading on BTC/ETH.
With this in mind, when you engage in yield farming, you need to consider the volatility levels for both cryptocurrencies in a given pair.
Diversity of yield farming income
When you deposit money into a traditional savings account, interest is paid in the corresponding currency. For example, depositing $1,000 into a savings account of most banks at an APY of 1% would yield $10 in interest per year.
However, in the case of yield farming cryptocurrencies, there are several clear factors to consider.
✔ First and foremost, your interest payments will be distributed in cryptocurrencies , not fiat money.
✔ Second, there can and will be differences in the digital assets into which interest is paid.
✔ Importantly, this will largely depend on the yield farming platform you choose to use.
✔ For example, if the yield farming platform specializes in digital assets running on the Binance Smart Chain, then your rewards can be paid in BNB.
✔ On the other hand, the yield farming service can pay out rewards in its own token.
Therefore, this is something to consider when looking for the best yield farming platform for your requirements.
We have mentioned lock-up periods several times in this guide. In a nutshell, the period refers to the length of time you have to block your tokens in order to make a withdrawal.
✔ Crypto.com, for example, offers up to 14% per year on stablecoins if you block your tokens for at least three months (CRO rate requirements also apply).
✔ This means that, as with traditional bonds, you will not receive a return on your invested capital until the lock-up period ends.
✔ However, there are also platforms such as Aqru that specialize exclusively in flexible accounts.
✔ This means that you won't have to block your tokens for a minimum number of days or weeks. Therefore, you can withdraw your cryptocurrencies from the platform at any time.
The lock-in conditions set by the chosen yield farming platform are an important factor to consider before registering.
Finally, if you need access to your digital assets, but your tokens are locked in a smart contract - you won't be able to make a withdrawal until the minimum redemption period has passed.
Frequency of distribution
Another thing to keep in mind when looking for the best yield farming platform is the frequency of distribution of your interest payments.
For example, platforms such as Aqru They pay interest daily. This allows you to re-deposit funds into an interest-bearing account, which in turn allows you to take advantage of the compound growth effect.
On the other hand, some yield farming platforms pay interest after the lock-up period ends. This means you won't have access to any funds - including rewards and your initial principal investment - until the lock-up period ends.
Is Yield Farming cryptocurrencies profitable?
There is no doubt that the main purpose of engaging in yield farming is to make money. However, the question arises - how profitable is yield farming of cryptocurrencies?
There is no clear and quick answer to this question, as there are too many variables involved. For example, the first thing to consider is the specific APY return you will receive for lending your cryptocurrencies to a liquidity pool.
In its most basic form, if you borrow $2,000 worth of cryptocurrencies at an APY of 10%, in 12 months your portfolio of digital assets will be worth $200 more after a year.
In the world of cryptocurrencies, however, it's not so simple, as rewards are paid out in cryptocurrencies rather than fiat money.
Therefore, it is important to consider that the value of the cryptocurrencies invested and received in the form of interest will fluctuate depending on market forces.
To clarify this point, let's look at a simplified example:
✔ Let's say you decide to invest in an Ethereum pool that offers an APY return of 6% per year
✔ You invest a total of 1 ETH, which is worth $3,000 at the time of deposit.
✔ 12 months later, an investment in 1 ETH yielded 0.06 ETH in interest, bringing the total balance to 1.06 ETH.
✔ At a price of $3,000 when the investment was made 12 months earlier, the balance of 1.06 ETH would have been worth $3,180.
✔ However, since Ethereum is now trading at $4,000 per token, the balance of 1.06 ETH is now worth $4,240.
As you can see from the example above, the main goal of cryptocurrency yield farming is not only to obtain an attractive APY, but also to watch the value of a given token increase on the open market.
If you do, you will make money on two fronts - interest and capital gains.
However, as we will explain in more detail below, if the value of the token falls while engaging in yield farming, your investment may be worth less when you withdraw.
What are the best cryptocurrencies for Yield Farming
As we mentioned earlier, there is virtually no limit to the number of digital assets that can be used to earn interest through yield farming.
This is because the main premise of yield farming is to provide a specific trading pair with a sufficient level of liquidity.
And when you consider that all cryptocurrency trading pairs require liquidity to ensure optimal market conditions, it means you have plenty of options when it comes to choosing a token.
Keep in mind, however, that the specific liquidity pool your tokens go into will have a big impact on how much you can earn.
✔ If you were to provide liquidity for a major pair such as ETH/BTC or BNB/ETH, then the APYs offered will be somewhat more modest.
✔ However, if you add funds to a less liquid pool such as AAVE/ETH, more competitive interest rates are available.
✔ At the other end of the spectrum, if the liquidity pool is for a newly launched digital token with a small market capitalization, you may be able to get a triple-digit APY return.
Again, the cryptocurrency you choose to yield farm should depend on your risk tolerance. A good way to mitigate the long-term risks of yield farming with cryptocurrencies is to spread your investment across different pairs.
Is Yield Farming taxed?
You probably know that many countries tax profits from cryptocurrencies as capital gains. In other words, if you buy $1,000 worth of Ethereum and withdraw it for $1,500 - then $500 of that amount may be taxable.
However, you may also be required to pay tax on any gains made through profit-making tools such as yield farming. Depending on your country of residence, these profits may be taxed in the same way as income from interest accounts or dividend payments.
However, it is important to remember that cryptocurrency-related taxes - especially with regard to yield farming - is a very complex area. As such, it is best to speak with a qualified advisor who specializes in cryptocurrency taxes.
What is the difference between Yield Farming vs Staking
There is often a misconception that yield farming and staking refer to the same thing. However, although both tools allow generating interest on inactive cryptocurrencies, there are some differences.
The most important of these is where your tokens are deposited.
✔ In yield farming, your cryptocurrency is deposited in a smart contract. In turn, this smart contract distributes your funds to a liquidity pool.
✔ With cryptocurrency staking, your digital tokens are usually deposited directly into the relevant blockchain network.
There are advantages and disadvantages to both yield farming and staking, so consider which tool is best for your investment goals and risk tolerance.
For example, cryptocurrency staking is potentially safer than yield farming because the tokens are locked into the blockchain network rather than a third-party smart contract.
However, this means that the profit offered for cryptocurrency staking is usually much lower compared to yield farming. In addition, when you stake cryptocurrencies, you can only do so on a blockchain network that uses a proof-of-stake consensus mechanism.
Yield farming, on the other hand, can be generally available for any cryptocurrency.
Is Yield Farming safe?
Before you begin your journey with yield farming, you need to consider the risks.
Finally, when you consider that many liquidity pools offer double- and even triple-digit APY interest rates, the risk of loss is much higher compared to conventional savings accounts.
The main risks we identified during our review of the best Yield Farming platforms are as follows:
Volatility of the token price
The first risk to consider when engaging in a yield farming strategy is the risk associated with the market value of the token.
✔ Let's say you invest $1,000 in the liquidity pool of a newly launched token - which brings in 50% in revenue per year
✔ At the end of the first year, you will have 50% more tokens than at the beginning.
✔ In theory, this means that your $1,000 is now worth $1,500.
✔ However, if the value of a given token has since fallen by more than 80% - your original investment is now worth significantly less
This is because tokens worth $1,500 now have a market value of just $300.
That's why it's best to invest funds only in liquidity pools that contain established and large capitalization tokens.
Although there is still a possibility that the value of the token will fall during the farmout, the risk of such an event will be lower compared to less liquid projects.
Risks associated with the platform
Many of the best cryptocurrency Yield Farming tools are offered by third-party platforms. Regardless of whether the platform operates in a centralized or decentralized manner, you must remember that your funds are never 100% certain.
✔ For example, if you invest funds in a centralized yield farming site, you entrust your funds to a particular provider.
✔ This means you have to trust that the provider will keep your funds safe, away from the threat of hackers.
✔ You must also trust that the centralized platform will pay you the interest you are owed - and that it will meet your withdrawal request when it is time to pay.
In the case of a decentralized platform, your contract will be honored bysmart contract. However, while smart contracts are known for their immutability and transparency, they are not 100% reliable.
By this we mean that it is likely that a bad actor will find a loophole in the underlying code. If this happens, your funds may be at risk.
In the cryptocurrency industry, the term "rug pulls" refers to digital token projects that are created for the sole purpose of theft.
This can happen when the project creator absconds with the cryptocurrencies raised during the initial fundraising campaign.
Therefore, by putting money into a high-yield yield farming project that turns out to be a rug pull, you are likely to lose the entire value of your main investment.
Another risk to consider before investing funds in a yield farming pool is liquidity risk.
By this we mean that if a pool has a minimum lock-in period, you will not have access to your funds until the redemption period expires.
This can be very problematic if you need access to quick cash - but the funds are locked in a liquidity pool.
This guide for those starting out in yield farming discusses all the benefits and potential drawbacks of this niche sector.
The most important conclusion is that the best cryptocurrency platforms in the yield farming market allow you to earn interest on idle digital assets in a secure and flexible way.
We found that overall the best provider in this market is Aqru, which offers attractive annual interest rates on stablecoin and cryptocurrencies. The most important feature of the platform is its flexibility, the importance of which in the cryptocurrency market cannot be overstated. There are no lock-in periods for most products, and it only takes a few minutes to start using an interest-bearing account.
The views and opinions expressed here are solely those of the author and should not be taken as financial advice either. Every investment and transactional activity involves risk, so you are advised to do your own research when making any trading, investment or financial decisions.