Liquidity Pooling as a Sustainable Alternative to Yield Farming in Decentralized Finance
Authors
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Mandeep Gupta
Director, Triple Dash Infotech Pvt. Ltd.
https://orcid.org/0009-0005-3542-1408
Keywords:
Liquidity pooling, Yield Farming, Decentralized FinanceAbstract
The evolution of decentralized finance (DeFi) has introduced novel methods for cryptocurrency-based income generation, particularly yield farming and liquidity pooling. While yield farming gained rapid popularity due to initially high returns, it has proven to be largely unsustainable and volatile. This paper explores the fundamental limitations of yield farming, including unstable returns, inflationary token models, and high entry barriers. In contrast, liquidity pooling offers a more stable and usage-driven revenue model. This study evaluates the risks and advantages associated with both approaches and advocates for liquidity pooling as a more reliable long-term investment strategy within the DeFi ecosystem.
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