Decentralized finance, or Defi, has been one of the hottest topics and major focuses in crypto development over the last 18 months or so.
Basically, Defi gives everyone equal access to financial applications in a decentralized environment. Many of these financial tools and applications in traditional centralized environments are very exclusive and limited to who can participate and benefit from them.
In this How To Crypto blog, we'll look at what liquidity pools and yield farming are, but we'll also share a step by step on how to participate in yield farming involving the Newscrypto token and the Dfyn token, the native token on the decentralized exchange DFYN, which is on the Polygon network(formerly known as Matic network). It's important to point out name change as many tools still refer to it as Matic, but anytime you hear Polygon or Matic, they are the same.
Polygon is a protocol and a framework for building and connecting Ethereum-compatible blockchain networks. Many people have begun to shy away from Defi protocols on Ethereum lately due to the high network fees to swap or provide liquidity. Polygon solves this with their layer 2 bridge and fees are usually equivalent to pennies or less for transactions on the Polygon network and in effect on the DFYN platform.
Before we dive into the how-to steps to benefit from the NWC-DFYN liquidity pool and yield farming, it is important to slow down and share the basics and meaning of what those terms mean. Liquidity pools are a foundational piece of current Defi ecosystems. Simply put, liquidity pools are a lump of funds deposited into a smart contract that allows the person providing liquidity to earn a portion of trading and lending fees. These funds can facilitate trading, lending, and other functions. Users known as liquidity providers add an equal value of two tokens in a pool to create a market. So for instance add liquidity to the NWC-DFYN pair, you have to deposit equal value of each token.
Next we will look at yield farming and what that is. When you add liquidity to a pair, you deposit funds into a smart contract, equal value of each cryptocurrency in the pair. One change you get an LP token which represents your ownership in the liquidity pool. This gives you rights to earn a portion of the trading and lending fees. You can then redeem these tokens when you are ready to remove the liquidity you provided. You can then deposit these LP tokens to earn a yield, in some cases on different platforms, or in the case of the NWC-DFYN pool, on the same platform.
At the time of writing this, the APR that is being paid out by farming you NWC-DFYN LP tokens is greater than 400%. So, the best way to learn is to do. Now let's go through the steps you can take to benefit from this yield farming. There are quite a few steps to this but looking at the benefit of an APR over 400%, it is definitely worth it. It is also important to point out some of the risks of yield farming. The value of each token in the pair could be volatile and impact your overall profitability, especially in the short term.
Ok, let's get started so you can benefit fromthis liquidity pool. First you want to make sure you have a Metamask wallet setup. If you don't, you can watch this short video on how to set it up.
Next you will need to add the Matic mainnet to your metamask wallet. Here is a quick guide on how to add it to your metamask wallet.
Follow the below screenshots to add that to your wallet. Select the network list as seen in the below screenshot and click Custom RPC. Then enter the details as seen in the following screenshot below.
You will also need a very small amount of Polygon in your wallet to transact. You just need to visit this Polygon faucet which will give each wallet enough Polygon tokens for a good amount of transactions.
As mentioned above, you will need an equal value of NWC tokens and DFYN tokens. The NWC tokens will need to be the erc20 tokens, meaning they are native to the Ethereum chain. You can either purchase tokens on Uniswap, send from Kucoin exchange, or send from the Newscrypto platform. When sending from the Newscrypto platform, it will give you the ability to select the erc20 token for NWC to withdraw.
The address that you put in withdrawal field on Kucoin should be your metamask wallet which begins with a 0x. The tokens on the Newscrypto platform are the tokens native to the Stellar blockchain. You will need to use the Cross Chain Swap feature on the Newscrypto homepage to swap from Stellar tokens to erc20.
One additional step is from within the Newscrypto platform, you will need to go to page for deposits and withdrawals and enter your metamask address under the whitelisted section.
The DFYN tokens can be purchased on the DFYN exchange by with Ethereum preferably, or with NWC tokens. We'll cover that in detail after explaining how to use the Polygon bridge to move your Ethereum tokens to the Polygon network.
Once you have your NWC tokens and Ethereum tokens in your metamask, the next step is to move them over to the Matic mainnet. Use this link to access the bridge.
This bridge allows you to move Ethereum and erc20 tokens to the Polygon network, which as a layer 2 solution, drastically reduces gas fees. From the bridge listed above, you can select which token in your wallet to move from Ethereum to the Polygon network via the bridge.
Once you have moved over the NWC tokens and Eth to the Polygon bridge, you will then go to the DFYN platform. https://exchange.dfyn.network/#/swap
Next you can swap your Ethereum for DFYN using the swap feature, which is almost identical to the steps to swap on Uniswap, Pancake Swap, or many other decentralized exchanges.
Once you now have your DFYN tokens, you are ready to add liquidity to the NWC-DFYN pool. Select pool from the top menu of the screen and then select add liquidity. Once you select that you will select NWC and DFYN as the pair to add liquidity.
Once you approve transaction in your metamask wallet and it is confirmed, you will now have the LP tokens like we mentioned in the beginning of this blog. You will then select the FARMS tab at top of screen and select the dual farm of NWC and DFYN. This allows you to earn both NWC and DFYN tokens within this farm.
This is also where you will see what the current APR% is that you will earn in the pool. It will vary depending on how much is deposited total, but the next 50+ days will be earning a substantial amount.
Once you see the NWC-DFYN Liquidity Mining page, you will select deposit and deposit your available NWC-DFYN LP tokens to the pool. Once you see your transaction is submitted, you can then just come back to later to claim your tokens earned.
While dual farm is still active, you can turn the earned tokens into more LP tokens and add to your liquidity farming to compound your earnings. You can do this as often as you’d like.
As I said earlier, this is a process that requires many steps, but can also have a decent return if you take the time to follow the process. If this is your first time yield farming, congratulations on your accomplishment. It is a learning process that you can benefit from with the right research.
Content written by Blockchain Wayne and NewsCrypto team