DeFi Explained: What is a Yield Aggregator?
Simply put, yield aggregators let users of DeFi platforms earn returns on their cryptocurrency holdings through “yield farming.” To fully understand yield aggregators, let’s first take a look at yield farming.
What is Yield Farming?
Yield farming began in 2020, with Compound, a decentralized lending platform launching their governance token COMP, distributed to users automatically in a novel way. Lenders and borrowers on its platform earned COMP weekly.
COMP is also a governance token, with an increasing value locked in. Most DeFi tokens follow this model, helping to establish the decentralized nature of the platform.
Opportunities in DeFi vary widely, however, with each protocol. Reward as well as risk levels may change as the value of governance tokens fluctuates with the market. Yield farming seeks the best opportunities across many protocols to maximize the rate of return of governance tokens. Opportunities include:
- Lending & Borrowing
- Liquidity Providing
- Staking
All generate yield, using its protocol token as a reward, incentivizing liquidity.
In many cases, users may deposit a token, borrow against it, swap for the original deposit token, and then re-deposit. This process compounds the rewards as a user may deposit and then borrow many times, maximizing the “farming rate” of a governance token.
What are Yield Aggregators?
Since returns can vary significantly between platforms, it can be tedious to manually hunt down yield at each platform. New protocols introduce functions to automate this process. Yield Actuators leverage DeFi platforms and the yield they offer to maximize profit for a user. In finding the best deals, yield aggregators also simplify and improve user experience. Besides shifting funds between various DeFi platforms with the highest yield, an aggregator navigates the best returns with the shortest commitment and the lowest Ethereum network gas costs. DeFi yield farming is easier to manage through yield aggregators along with the reward of savings on all “gas” fees for any investor who does manual yield farming.
The ideal yield aggregator offers investors a careful and unique risk management strategy based on their chosen personal risk tolerance profile. Yield aggregators can help investors find not only the best yield strategies but also the safest ones without the manual work.
Dangers
All yield aggregators are unique in design and function. Unfortunately, the yield aggregator space is fraught with multiple cases of hacks on platforms, resulting in the loss of millions of dollars of users’ funds.
Recent hacks include:
- yEarn DAI vault hacked for US $11m
- PancakeBunny flash loan hacked for US $200m
- Rari Capital hacked for US$11m
- Meerkat Finance hacked for US$31m
Finally, a Safer Alternative
The EQIFi DeFi Protocol is the world’s first DeFi platform powered by a licensed and regulated digital global bank. EQIFi is partnered with EQIBank, a leading global digital bank established in 2015.
This unique relationship affords users of EQIFi a new level of security and safety in DeFi. Users may choose their risk level with confidence that their funds will be allocated safely and appropriately.
The EQIFi Yield Aggregator is an automated aggregator of leading yield farming products, making yield farming automatic and straightforward.
It is designed to be accessible to those familiar with DeFi and yield farming and those entirely new to the sector. The platform will be the world’s leading self-investment platform, automatically assigning capital between different liquidity pools, and pursuing the best available profit and margin at all times.
Learn more about how the EQIFi Yield Aggregator can help you attain higher gains with your digital assets today at EQIFi.
The EQIFi Team