Maximizing Your Income with Automated Yield Farming

While cryptocurrency has become more widespread during the last couple of years, turning from a technology used by a few enthusiasts into one of the major investment methods, earning profits through cryptocurrency investment still may seem too complicated for many, as it requires specialized knowledge. DeFi yield farming is the strategy that solves this issue: it allows to profit from cryptocurrency using automation, reaping rewards regularly with minimum human input.

In 2024, the average revenue per user at the DeFi market surpassed $1300, which indicates the potential of DeFi Yield Farming as a source of potential income. However, it is necessary to understand that this metric characterizes an average level, while the profits of individual users may vary. Investing in DeFi is inherently risky. However, you can learn about efficient automated strategies to minimize the risks.

What is Automated Yield Farming?

Yield farming is a method of gaining profit from cryptocurrency by supporting DeFi (decentralized finance) platforms. DeFi projects often face the issue of low liquidity. To solve it, they incentivize investors to provide funds. The process looks like this:

• A user acquires crypto coins such as ETH.
• They deposit them into liquidity pools.
• In return, they receive liquidity provider (LP) tokens, representing their share in the pool.
• Tokens can be further reinvested, stacked, or traded to increase profits.

Performing yield farming manually requires constant monitoring, as an investor will need to constantly adjust their strategy as a reaction to the changes in the market. Automated yield farming uses complicated algorithms that make it possible to identify the most efficient way to operate in the current market environment and apply them without human input.

They also ensure access to the best automated yield farming strategies that are too complicated to be performed manually as they involve tracking multiple factors or conducting deals quickly, reacting to real-time changes.

Applying AI in automated yield farming

With the recent advances in AI technology, artificial intelligence and machine learning become an integral part of investment strategies. They are applied in several ways:

• Analyzing actual data to forecast market trends and identifying profitable opportunities.
• Continuously adjusting and improving strategies based on their current performance metrics.
• Determining the optimal way to allocate assets across several crypto coins or DeFi protocols.
• Evaluating the risk associated with various strategies and choosing ones that suit investor’s preferences.
• Identifying suspicious behaviors, such as potential hacking or fraud attempts.

Consequently, automated DeFi income strategies provide multiple benefits in comparison to other trading methods. They make it possible to combine multiple DeFi earning opportunities by connecting to several DeFi protocols and constantly evolve ensuring you have access to the most efficient strategies. 

Best Resources for Automated Yield Farming

Below you will find several examples of top automated yield farming platforms that are easy enough to use even for an investor who is just starting.

Beefy Finance

Beefy Finance is a DeFi platform that offers its users convenient tools for automated yield farming. It can be described as an autocompounder, which means it automatically reinvests the users’ earnings to maximize their profits.

On Beefy, users can invest in Vaults which are automated strategies based on smart contract code and constantly attempting to increase yield. There are three types of Vaults – single asset, stablecoin, and liquidity pools. Smart contracts the vaults are based upon are developed and tested by multiple participants. They create a constantly growing assortment of investment opportunities with various risk-reward rates.

In Q1 2024, according to their quarterly report, Beefy Finance doubled its TVL (Total Value Locked), reaching $60 million. 135 new vaults were launched since the beginning of the year, to answer the new trends of the cryptocurrency market and provide users with efficient strategies. The Total Treasure Vault income in Q1 2024 surpassed $400 000, which is significantly higher than in the previous quarter and demonstrates an optimistic attitude on the market.

By participating in Vaults, you also earn BIFI tokens that allow owners to take part in decision-making on the platform according to their share. The holders of these tokens also receive a share of platform dividends. The market capitalization of BIFI tokens as of July 2024 has surpassed $24 million.

In short, Beefy Finance has the following pros for those who are interested in yield farming:

• A wide array of strategies to choose from.
• Support of various crypto assets.
• Easy entry for beginner investors.
• No deposit fee.

Harvest Finance

Harvest Finance is another example of a DeFi platform that offers its users efficient automated yield farming tools. Currently, it offers over 100 yield strategies with ETH, USDT, WBTC, and other coins. It employs several DeFi protocols, namely Ethereum Mainnet, Base, Polygon, Arbitrum, zkSync Era, and Polygon. The market capitalization of Harvest Finance token FARM reached $25 million in August 2024.

Similar to Beefy, Harvest Finance provides its users access to Vaults which represents automated DeFi income strategies. To earn passive income, users need to deposit their ERC-20 coins, such as USDT or USDC, into the vault. From that point, the strategy will operate automatically. The team behind Harvest Finance claims to constantly work on developing new techniques and strategies, which are further implemented in their vaults.

In short, Harvest Finance has the following pros:

• Low transaction fees (0.03%)
• Multiple opportunities to earn interest immediately after depositing your funds.
• Regular updates with efficient yield farming strategies.

Rivo

Rivo is a crypto investment platform that provides easy access to DeFi yield farming. The team of the project constantly analyzes yield strategies to find the most reliable ones. Transparent information about the risk-reward ratio for each offered strategy allows users to build a balanced portfolio, for their chosen approach, from risk-averse to aggressive. If the performance of the strategy undergoes significant changes, the users get notified, so they can react accordingly. The fee for using Rivo is 0.3$ of the swap amount for each transaction.

In short, Rivo has the following pros:

• One-click investment options are accessible for beginners.
• Thorough risk scoring and strategy analysis.
• Filtering strategies by various criteria to find the most suitable investment options.
• Non-custodial approach which improves security and reduces the risk of losses.

How to Choose a Platform for Automated Yield Farming

There are other platforms that support automated yield farming as well. Here are several points to consider when looking for the right one.

• Gather the information about the DeFi platform. Check, how long it has existed, in what jurisdiction it is registered, and what is known about its income sources. Some platforms publish official financial reports, so it is worth looking at them too.
• Check what DeFi protocols and coin pairs are supported. Use this information to determine what crypto assets you need to acquire for your investment.
• Check the APY levels for the strategies you want to invest in. The current APY can fluctuate depending on the market environment, the supply and demand of a particular cryptocurrency, as well as other factors.
• Learn about security features. Give preference for the well-established platforms. If the smart contracts are open-source and community-reviewed, it is an additional benefit, as this eliminates the risks of bugs, loopholes, or malicious code in the smart contracts.

As with other investment strategies, it is often advisable not to pour your resources into one asset, platform, or strategy. On the contrary, you will benefit from trying out several platforms with smaller investments to determine what works for you and what you find more reliable, combining several strategies and asset types for maximizing returns with automated yield farming.

In Conclusion: Risks and Benefits

As you can see, using automated yield farming tools has its pros and cons. The following benefits of using automated DeFi income strategies are the most noticeable:

• Higher potential returns in comparison to traditional investment.
• Automated operation, which does not require constant monitoring and adjustment.
• An ability to diversify your portfolio through investing in various DeFi protocols.
• Using strategies that are adapted to the utmost recent development on the market.

However, there are certain issues which often complicate the life of a DeFi investor:

• Smart contracts, being essentially pieces of code, are prone to bugs and hacker attacks. To avoid the risks in this category, give preference to established DeFi platforms with open-source or transparently audited smart contracts.
• Gas fees reduce your profits. Gas fees are the fee for executing Ethereum transactions. They can vary depending on the load on the network, in the worst case making farming unprofitable. Using a DeFi platform may involve paying fees on each transaction as well. Study the structure of the fees before investing and account for it when calculating potential profits.
• Higher volatility than on the traditional stock market. There are known cases of the value of the coin dropping by more than 50% within weeks, like what happened with Bitcoin in 2022. Such drastic changes inevitably affect the whole market. To mitigate the volatility-related risks, diversify your portfolio, combining conservative and aggressive strategies.

While yield framing automation involves certain risks, they can be significantly lowered by studying the market, choosing reliable DeFi platforms, and building a diversified investment portfolio. With such an approach, you will be able to profit from the yield farming strategies.