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Leveraged Yield Farming
Introduction to Leveraged Yield Farming
DeFi users are chasing higher investment returns from platform to platform and from network to network. Undoubtedly, leveraged yield farming is one of the most popular choices used by experienced DeFi users to maximize their profits.
Yield farming grants users additional incentives for providing liquidity to a liquidity pool. Meanwhile, leveraged yield farming is a mechanism that allows users to ramp up their yield farming position by borrowing funds in order to multiply their yields. In other words, you borrow funds so you can invest more, and, as a result, to earn more. But of course, you have to pay borrowing interests for the extra capital.
In addition, different from most of the traditional lending platforms, leveraged yield farming allows users to borrow under-collateralized loans, which establishes higher capital efficiency for yield farmers. Moreover, this might create a higher utilization rate of the lending pool, sometimes hitting more than 90%, which means a higher borrowing interest rate you would need to pay.
Last modified 5mo ago