If you are just starting in DeFi, and trying to get into the blockchain, but you are not considering Ethereum due to its high gas fees, which blockchains should you focus on? What are the best DeFi Yield Farming opportunities for beginners? Let’s find out!
DeFi kingdom is being built on AVAX, making Avalanche one of the main places to be right now.
It is starting to get some congestion, making gas fees more expensive at the moment. For those who have less than a four-figure portfolio, Avalanche might not make as much sense.
As a beginner, you should be looking for a blockchain with lot of things to do, and with a lot of new and high quality projects coming out in a near future. From this standpoint, Avalanche is a perfect candidate, especially if you are looking to use Yield Farming. Avalanche literally has everything you need. You can borrow against your collateral. You have Curve and GPL. There are many amazing projects, where you can earn excellent yields on the blue chip assets.
On top of that, with the scaling technology a lot of new and exciting projects will be coming on to Avalanche. Harmony One and Core projects are going over to Avalanche because that’s where the opportunity is at.
The best developers and projects will be migrating to Avalanche to launch their own subnet and use their tokens. The overall ecosystem is super supportive, with a very good community and a lot of smart and talented people.
There is a lot of great farms on Polygon to learn on, understand, and build. Polygon has been very quiet over the last six months. A lot of people left polygon for Phantom, Avalanche or Solana. But during that time a lot of interesting projects have been built on Polygon.
Polygon’s new technology developments drive improved performance, security and decentralization. Some of the newer technologies, such as NFTs and Game-Fi, are going to come to Polygon, mainly because of low gas fees, which are just fractions of pennies.
Although Polygon is its own separate chain, it is technically a side chain that submits its state over to Ethereum every now and then. Polygon’s real mission is to scale Ethereum. Therefore, it is more “politically” aligned with Ethereum and not as controversial of a pick for the core Ethereum community.
There are several different kinds of stablecoins.
The most popular, sustainable, and safe so far have been collateralized or cash backed stablecoins like USDC Circle, that holds dollars to back up USDC. Allegedly, Tether has dollars to back up USDT too, although some may question this.
DAI and MIM stablecoins are over collateralized with decentralized assets. This gives security in the event of a bank run, and provides more stability to keep the peg. However, it is hard to scale and over-collateralize hundreds of billions of dollars in stablecoins.
Then there are the algorithmic stable coins, like UST. There has been numerous algorithmic stable coins, but the vast majority of them have exploded in adverse market conditions. You may remember the Iron Titan fiasco that was pretty famous about a year ago. And now UST just lost its peg on May 9 and went from $0.99 to $0.06 in a matter of 4 days.
Terra Luna | Anchor Protocol & UST
Terra may not be the best place to start with DeFi for beginners, because it is a little bit of an outlier in terms of ease of integration. If Terra station makes user experience intuitive enough at the levels of Metamask, they could certainly get more people on to use Terra.
There’s a lot of things in Terra that are specifically catered towards LUNA and UST, and not necessarily towards anything else
Terra has one key protocol – Anchor, which has an unsustainable yield of 20% on UST.
Terra literally put their money to pay other people to join Terra, which means they are paying to acquire users and capital to come on the blockchain. As entrepreneurs, they are trying to get as much capital as possible from other blockchains, as well as attract new money in Terra Luna.
Avalanche and Polygon did the same thing: they spent money to acquire users and bootstrap adoption across various ecosystems or at least grow their own ecosystem.
Is 20% a good risk-adjusted return? It certainly appeared so until the recent crush. Terra lost~86% of its value. It is unknown whether Terra will be able to rebuild the trust of its users and recover after the recent attack. Given the magnitude of the collapse, 20% yield will not be enough to convince some users to continue using the platform.
UST will reach its escape velocity when people in times of uncertainty are okay with running to UST because it’s a stable coin, much like they do now days with Tether or USDC. Clearly, we are not there yet.
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