There are lots of ways to generate revenue from cryptocurrency trading. Trading Alternative Coins (Altcoins) is the most popular, but it is not the only option. You can also make money by interacting with a Yield Farming protocol.
The concept of Yield Farming was popularized owing to the need to create a robust system that facilitates decentralized transactions.
The Benefits of Interacting with the Collar Protocol
Collar Protocol may not be the first or the most decentralized lending protocol, but it has some unique features that are relevant in today’s crypto market.
Here are some of the benefits of interacting with the protocol:
1. Hedge for Crypto-Assets
The crypto market can be tricky sometimes. Whales can create Fear, Uncertainty, and Doubt (FUD) in the market just to scare most traders into selling their crypto-assets. Likewise, negative news emanating from a regulatory policy can also pummel the crypto market into a massive dump.
In such cases, most traders often convert their portfolios into the Tether USD (USDT). However, this could trigger the risks of de-pegging and margin calls.
For that reason, Collar Protocol opted to act as a hedge for crypto-assets. What it does is to allow the position holders/whales, as well as the lending aggregators to maintain the position they hold even if they are changing a Yield Farming strategy.
2. Passive Income
Yield Farming is one of the passive income opportunities that allow cryptocurrency investors to “farm” new crypto tokens by adding liquidity (contributing crypto tokens) to the liquidity pool.
By using Collar Protocol, you will qualify for more passive income opportunities. The most popular way to do this is by depositing your stablecoin (such as USDT) in the portfolio or liquidity pool. In return, you will earn supply interests or new crypto tokens that accrue to the tokens you contributed for liquidity purposes.
The second aspect is the stablecoin-to-stablecoin lending model created by Collar Protocol to earn more income or yield. This is done by depositing the borrowed tokens into another liquidity protocol that pays interests/yields.
Collar Protocol also goes the extra mile to protect the interests of the Yield Farmers by ensuring that it tackles the two most important risks. These risks are risks associated with the protocol pricing model and risks of losing capital.
The solutions offered by Collar Protocol, in this case, are to use a fixed interest rate to tackle manipulation tendencies and using a no over-collateralization approach to maximize the LTCV.
Decentralized lending protocols make the concept of Decentralized Finance (DeFi) more attractive. The wise selection of solutions offered by Collar Protocol will go a long way to help investors protect their crypto investments while interacting with a Yield Farming protocol.
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