How Tokemak Automates Low-Risk Yield Farming - DeFriday #16

This week’s newsletter is sponsored by On Deck’s new community-backed accelerator, ODX. ODX backs you with $125,000 and an All Access Pass to the On Deck network to hire talent, fundraise, and find customers. Read more details at the bottom of the post or check out the details below.

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There are two primary sources of passive income from crypto assets: 

The first is lending, where other people pay you interest to borrow your crypto so that they can make leveraged investments of their own. 

The second is yield farming, where you provide liquidity to decentralized exchanges in order to earn trading fees, and then stake those liquidity pool positions to earn additional incentives.

With crypto lending, you might earn 2-10% APR even on lower-risk assets like stablecoins. Compared to TradFi that’s an insanely great interest rate, but in the crypto world, it’s nothing too crazy. 

The right liquidity pool might pay hundreds, or even thousands, of percent per year in incentives. Now, a 1000% APR is usually not quite real, as I wrote about in “where does the yield come from?” but even if the true APR is 20% that’s still insanely good!

But there are a number of downsides with trying to find these high-yield opportunities for your assets.