Want to earn $NFTART by staking another token? Or are you looking to get started with Yield Farming $NFTART in order to earn tokens?
There are many reasons for getting into farming and staking, but there are also risks to be considered. In this article we lay out the fundamentals of staking and yield farming, the risks involved and how to get started with staking and farming $NFTART on AutoShark.
What is staking?
Staking is a way to earn rewards on your tokens by supporting the blockchain and validating transactions. By staking crypto, your assets are locked by a smart contract untill you unstake them. To incentivize user to provide liquidity to the AMM, stakers are rewarded in block rewards or from designated reward pools. Rewards can be paid out in the staked token or in other tokens.
Staking pools usually have a set reward - in the form of a reward pool or block rewards. That means that the more people staking in the pool, the lower the rewards. Because of this, you can expect APRs to diminish as the liquidity locked increases and more people join the pool.
AMMs have several mechanics they use to incentivize users to stake in certain pools. Usually the pools and farms that give the highest APRs are pools with low liquidity or pools that are crucial to the AMM.
There are several benefits to staking; you are able to earn one token while holding another, thus diversifying your portfolio and gaining additional crypto without any cost. In addition, you help secure the network and avoid the risk of Impermanent Loss, which we shall touch on a bit further down the page.
What are APRs APYs and Multipliers?
APR stands for Annual Percentage Rate and designates the interest rate on a particular pool or farm for the year. If a pool or farm has an APR of 100%, you will gain 100% of your staked funds in rewards after a year.
APY stands for Annual Percentage Yield and designates the yield from a particular pool or farm for the year. The main difference between APR and APY in this context is that APY takes compounding into account, while APR does not.
Multipliers designate the amount of rewards paid out to a particular farm. On AutoShark, if a farm with a 1x Multiplier gets 1 FINS per block, a farm with a 5x Multiplier would get 5
You can stake $FINS and $JAWS in AutoShark's Ocean Pools to earn $NFTART.
Before you can start earning $NFTART you need some $FINS or $JAWS and a BSC-compatible wallet. To get started with staking, simply connect your preferred wallet to AutoShark and enable the pool you want to use by signing with your wallet. After this, you can stake your tokens, sit back and enjoy the rewards.
What is Yield Farming?
Yield Farming refers to the practice of providing liquidity to an AMM in return for transactional fees and additional token rewards. In essense liquidity providers provide liquidity for a paring (like NFTART-BNB) and share a percentage of its transactional fees, proportionate to their share of the pool. As a representation of the staked funds, liquidity providers receive an LP token that can be staked to earn additional rewards.
Yield Farming rewards you with transactional fees and staking rewards and you gain the benefit of holding two tokens instead of one, thus diversifying your portfolio. Compared to staking, yield farming does present additional risks.
The risk of Impermanent Loss is everpresent for Yield Farmers and one should keep this in mind before starting one's first farm.
What is impermanent Loss?
When providing liquidity to a pool, you are exposed to Impermanent Loss. It occurs when there is a price change between the deposited assets compared to the time of deposit. The bigger the divergence in price, the bigger the loss in token value compared to simply holding both assets seperately. The loss is deemed impermanent, because the lost value can be redeemed, given that the prices ratio of the two assets return to what it was as the time of deposit. In that sense, the loss is only realized when the assets are withdrawn from the pool. To a degree, Impermanent Loss is offset by both transactional fees and staking rewards, but one should always be wary of this when yield farming.
For a more in-depth account of Impermanent Loss, we recommend this article.
You can start an NFTART-BNB Farm on AutoShark's Farms!
Before you can start farming, you need a 50/50 split of NFTART-BNB. Click "Get NFTART-BNB" to add your liquidity to the pair. After adding liquidity and receiving your LP-tokens, you will start receiving rewards in the form of transactional fees. By staking LP-tokens in the farm, you will start receiving additional rewards in the form of $FINS. You can harvest your rewards whenever you want, but you should be aware of the transaction fees before you press harvest.
Harvested $FINS can be staked in the Vaults or Ocean pools for additional rewards.
To monitor your rewards and Impermanent Loss, you can make use of a DeFi Dashboard.