Anyone can earn rewards by depositing specific digital assets into certain decentralized applications (DApps). Known as yield farming, it is a way for enterprising people to maximize their returns on their crypto holdings.
This article demonstrates yield farming using Bitcoin.com’s decentralized exchange, Verse DEX, which is currently offering up to 14% APY on this strategy.
For more information on Verse Farms, please see the Verse Farms FAQ page.
For basic instructions on how to use the Verse DEX (how to connect your wallet, etc.), please see this guide.
Table of contents
The Basics of Yield Farming in DeFi
Crypto projects offer yield farming rewards in order to borrow people’s cryptoassets. Typically projects use borrowed assets to increase liquidity, but there are other use cases such as staking. Deep liquidity is one of the most important attributes for any financial market because it enables fast and efficient financial transactions. For a thorough introduction to liquidity, read this article.
Yield farming is a good strategy to increase liquidity. New projects can jump start their liquidity and established projects with decreasing liquidity can reverse the trend by offering generous incentives.
For an in-depth explanation of yield farming, please read the following article: What is yield farming?
This article focuses on yield farming by providing liquidity through Verse Farms.
Introduction to Verse Farms
Verse Farms are a collection of smart contracts on Bitcoin.com's decentralized exchange Verse DEX where Liquidity Providers (LPs) can deposit LP tokens to earn rewards. Farm rewards are paid on top of the trading fees you already earn by providing liquidity. Verse Farm rewards come from the Verse Ecosystem Incentives program. Specifically, 35% of the Verse token supply is allocated to rewards distributed via yield farming, staking, airdrops, and other mechanisms.
It’s a 2-step process to yield farm on Verse DEX.
Get liquidity pool (LP) tokens.
Deposit those LP tokens into a farm.
Don’t worry if you aren’t familiar with the terms, “pool” or “LP token.” They are simple concepts that will be explained in the section below.
Pool: Every DEX trading pair has its own pool of liquidity. These are called “pools,” or sometimes “liquidity pools.” For example, on Bitcoin.com’s Verse DEX, the popular trading pair VERSE-WETH has a deep pool of liquidity which is half VERSE and half WETH (wrapped ETH). Liquidity providers to DEX pools earn a proportional share of the total volume of assets swapped by people who trade between the assets in the pool. In the case of Verse DEX, the earnings for liquidity providers are displayed as a dynamic APY in the Pools section.
LP token: When you deposit cryptocurrencies into a liquidity pool, the smart contract mints and sends you a token that is a kind of receipt. This token, known as a liquidity pool (LP) token — also sometimes called a liquidity provider token — is used to realize any outstanding rewards from your position, and to withdraw your deposited cryptoassets.
APY: APY stands for annual percentage yield. It is a way to calculate interest earned on an investment that includes the effects of compound interest. For an in-depth look at APY, read the article What is APY?
How to Yield Farm on Bitcoin.com's Decentralized Exchange Verse DEX
As stated above, yield farming with Verse Farms is a 2-step process:
Get liquidity pool (LP) tokens on Verse DEX.
Deposit those LP tokens into a farm on Verse DEX.
Step 1: Get liquidity pool (LP) tokens on Verse DEX
You get LP tokens by providing liquidity to the Verse DEX. You’ll earn yield in the form of the fees paid by people who trade the pair.
Before you provide liquidity, you need to check which Pools Verse Farms supports. You can see the current Verse Farms by going to https://verse.bitcoin.com/farms. As you can see, each Farm displays its current APY:
Once you’ve decided on a Farm, for example “VERSE/ETH,” you will need to deposit VERSE and ETH into the VERSE/ETH liquidity pool. This is done from the pools page:
If you don’t have one or both of the cryptocurrencies for the pool you're depositing into, you can buy or swap in seconds using the Bitcoin.com Wallet app.
Here's how to deposit into a liquidity pool on Verse DEX:
In the “Pools” tab, select the pool you’d like to add liquidity to and hit “Deposit.”
Enter the amount you’d like to deposit. You can choose between manually depositing equal amounts of both pool assets or depositing one of the two pool assets only. To choose between these two modes, select either "Default Assets" or "Single Asset":
If you choose "Single Asset," Verse DEX will automatically convert half of that token to the other token in the pair, then deposit both into the pool. Read more about this feature here.
When you are ready, hit the “Confirm Deposit” button.
Confirm the transaction and you're done! You will receive liquidity pool (LP) tokens (eg. VERSE-X (VERSE/ETH) in your wallet. These LP tokens are like a receipt for your deposit; they represent your proportional ownership of the liquidity pool. You can later redeem these LP tokens for the underlying assets (eg. VERSE and ETH) in the pool plus your rewards. You can track your rewards in the “Pools” tab and withdraw your liquidity + rewards whenever you want.
This video demonstrates the process of depositing into liquidity pools on Verse DEX:
Step 2: Deposit LP tokens into a farm on Verse DEX
Once you have the LP tokens that are accepted in a farm, it’s a simple matter of depositing the LP token into the appropriate farm:
This video demonstrates the process of depositing LP tokens in Verse Farms to earn farming rewards:
How to Claim Rewards from Verse Farms
You can either withdraw your LP tokens and claim rewards at the same time, or you can leave your LP tokens in the Farm and claim rewards.
Withdraw and claim rewards simultaneously
Connect the same wallet above wallet to Verse DEX.
On https://verse.bitcoin.com/farms click view on the Farm you want to withdraw and claim rewards from.
Select Withdraw Farm Deposit.
Enter MAX as the amount to be withdrawn and press Confirm Withdraw.
Follow the approval requests in your wallet. You're done!
This video demonstrates how to withdraw your LP tokens and claim rewards simultaneously:
Claim rewards only
How to Withdraw LP Tokens from Verse DEX
Connect the same wallet above to the Verse DEX.
Go to https://verse.bitcoin.com/farms and click view on the Farm you’d like to withdraw from (eg. ETH-VERSE).
Click “Withdraw,” then enter the amount of LP tokens you’d like to withdraw. If you withdraw the full amount, you will automatically receive any unclaimed rewards.