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Providing Liquidity to DEXes — Key Benefits
Before jumping into any farming protocol, it’s important to understand where your money is going and how your rewards are generated. By reading this, you will understand what farming is and where your returns come from.
A DEX (decentralized exchange) is a platform that enables straight P2P transactions using virtual currency. Unlike the traditional order book method and third-party control that is the feature of centralized exchanges, DEXes give you full control over your own data, and allow you to buy tokens without having to match with a seller, and vice versa. The reason that you can buy or sell without a counterparty is due to the fact that all trades are regulated through smart contracts, with funds taken or added to liquidity pools. DEXes require large reserves of funds to make sure that enough liquidity is required to facilitate trades, meaning users are incentivized to lend out tokens that can be used by the protocol, receiving a proportion of the fees and other rewards — this is what’s known as yield farming.
With many competing DeFi platforms on the market, DEXes need to provide generous conditions to entice participants to farm with them. Simply a share in the fees is not usually enough. Farmers are often provided with higher than usual APY, governance tokens, or extra rewards. Getting a handsome return for simply locking up your token can allow you to quickly grow your investment, but of course, is subject to price dips and impermanent loss as risk factors.
While there are small differences depending on the DEX you are providing liquidity to, the following steps generally apply.
- 1.Select the DEX
- 2.Select the pair
- 3.Make sure an equal amount of both tokens is in your wallet
- 4.Provide liquidity to the liquidity pool
- 5.Get LP tokens — representing your 50:50 token share in the pool
- 6.Stake your tokens for farming rewards
Farming with leverage gives you the option to capitalize on the great farming rewards offered by DEXes. Through an undercollateralized loan, you can farm 3x the amount of crypto, generating larger rewards than you would be otherwise able to do. Sound complicated? We make it simple, with:
- An easy-to-use interface
- Automated farming
PembRock counters the clunky and hard to use DeFi products that discourage the sector from being utilized by the wider community. In addition, we work on NEAR Protocol, a blockchain that is fast, inexpensive, scalable, and secure.
PembRock sits at the center of NEAR’s rapidly growing ecosystem, allowing us to capitalize on integrations with the freshest and most innovative projects. At launch we have already partnered with Ref Finance, meaning PEM token holders can already take advantage of rewards offered by this DEX
If you are PEM holder and want to start with DEX farms today, there are a growing number of options available to you.