10 Best Crypto Yield Farming Platforms for 2023

Kane Pepi

Kane Pepi is an accomplished financial and cryptocurrency writer who has an extensive portfolio of over 2,000 articles, guides, and market insights. With his expertise…

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Last updated: 28 April, 2023

Yield farming is a great way to earn passive income on idle crypto. While attractive APYs are available, yield farming also comes with its risks.

In this guide, we explore the best yield farming crypto platforms for 2023. We also delve into the finer details of how crypto yield farming works, including the pros and cons of this passive income tool.

Top Yield Farming Crypto Platforms Reviewed

Selecting the best yield farming crypto platform requires investors to research various factors. This includes the yield farming rates, supported coins, withdrawal terms, and the platform’s reputation.

Below, we review the 10 best yield farming crypto platforms for 2023.

1. eToro – Earn Passive Income on Staking Coins like ETH and ADA

eToro is a regulated broker offering staking tools, a great alternative to yield farming. Why? Yield farming requires investors to deposit two different crypto tokens, while staking requires just one. eToro currently supports three of the best staking coins – Ethereum (ETH), Cardano (ADA), and Tron (TRX). After buying one of these coins on eToro, staking rewards will be applied to the account automatically.

This kicks in after a short grace period. For instance, staking rewards on Tron and Cardano begin after seven and nine days respectively. eToro takes care of the fundamentals behind the scenes, so there is no need to have any prior knowledge of staking. Staking rewards of up to 90% are available depending on the customer’s loyalty tier. We also like that eToro provides a snapshot of the customer’s staking rewards every 24 hours.

This enables customers to keep tabs on how much they are making. eToro distributes the rewards on a monthly basis, directly to the customer’s account balance. Unlike traditional yield farming platforms, eToro is regulated by some of the most reputable financial bodies. This includes FINRA (US), ASIC (Australia), CySEC (Cyprus), and the FCA (UK). This ensures that the customer’s staking balances are always kept safe.

Those without any crypto coins to stake can easily purchase on eToro. The platform accepts many fiat payment types, ranging from e-wallets and bank transfers to debit/credit cards. A small FX fee of 0.5% is applied to all supported payment types. However, deposits made in US dollars will see this fee waived. We also like that eToro requires a minimum deposit of just $10.

In addition to the three staking coins mentioned above, eToro also supports some of the best altcoins. This includes Ethereum, Litecoin, Bitcoin Cash, and 90 others. eToro also supports some of the best meme coins and best shit coins, so there is a cryptocurrency to suit all investing goals. Also, eToro is among the best brokers to buy stocks and ETFs on a 0% commission basis.

eToro offers superb customer support around the clock via live chat. It also offers one of the best crypto apps on the market.

What is Crypto Yield Farming?

Generally, crypto exchanges pay interest to yield farming investors for providing liquidity for trading on the exchange. In effect, investors allow their tokens to be used for market-making and lending on the exchange.

Yield farming rewards are funded by trading commissions. That is, investors receive a share of commissions collected by the respective exchange.

Unlike crypto staking, yield farming requires investors to deposit two different tokens. This is because the investor provides liquidity for a trading pair, such as USDC/ETH or DAI/USDC. In turn, investment returns will also be determined by the market value of both tokens. This is why yield farming is considered a high-risk, high-return investment option.

Yield farming is available on both centralized and decentralized exchanges.

How Does Yield Farming Crypto Work?

In this section, we take a much closer look at how crypto yield farming works.

Exchange Liquidity

Yield farming is a win-win situation for both exchanges and crypto investors. From the perspective of the exchange, the platform receives much-needed liquidity. This ensures that buyers and sellers can trade in optimal market conditions. After all, insufficient levels of liquidity will result in slippage and an inability for market participants to agree on a price.

From the perspective of investors, yield farming promotes passive income on idle crypto tokens. This is because the exchange will share a percentage of trading commissions with those providing liquidity. Once the tokens are deposited by the investor, the earning process is completely passive.

Trading Pairs

As we briefly noted above, crypto yield farming requires liquidity for trading pairs. This means the investor will need to deposit two different tokens. This is where things get complicated, as an equal amount needs to be deposited based on real-time market prices.

For example, let's suppose an investor wishes to add liquidity for  USDC/ETH. At the time, one ETH amounts to $1,500. Suppose the investor wishes to deposit 2 ETH. This means that the investor must also deposit $3,000 ($1,500 x 2) worth of USDC. In total, the investor is depositing $6,000 worth of crypto into the yield farming pool.

In doing so, buyers and sellers can easily trade USDC/ETH without needing to worry about liquidity issues. With that said, yield farming is also an option on low-cap tokens. This means that liquidity levels will likely still be low. But equally, the yield farming rewards can be significantly higher.

STONK/WETH on OKX currently offers an APY of nearly 7,000%. However, the risk of loss on this farming pool is extremely high.

Volatility

Investors need to consider the token's market value when assessing profits and losses when staking crypto. In the case of yield farming, the investor needs to consider two different tokens.

For example, if both tokens deposited rise in value this can amplify returns for the investor. But if the opposite happens, losses are likely to be encountered.

This is why seasoned crypto investors will look to diversify their yield farming efforts. This means spreading the risk across multiple farming pools at any given time.

Share of Farming Pool

Yield farming is available to investors of all shapes and sizes. But the greatest rewards are offered to those with a larger stake in the respective farming pool. This is because rewards are distributed based on the investor's stake.

For example, suppose that an investor adds 50% of the liquidity on  USDT/BTCB. On day one, USDT/BTCB raises $1,000 in yield farming commissions. This means the investor will receive 50% or $500.

Impermanent Loss

Another complex term to understand when yield farming crypto is 'impermanent loss'. This relates to losses that occur when the value of the two deposited tokens changes in relation to each other.

This is because the yield farming platform will need to adjust the balance of the tokens in the pool to ensure they are equally valued.

• For instance, we mentioned above that investors need to deposit an equal number of tokens in terms of real-time market value.
• We'll say that 1 ETH is worth $2,000 USDC at the time. So, if the investor deposits 3 ETH they also need to deposit 6,000 USDC (assuming 1 USDC = $1).
• Let's say the investor proceeds with the deposit and that they now own 100% of the yield farming pool.
• A few weeks later, 1 ETH is worth $3,000 USDC. This means that the liquidity pool will have been rebalanced due to arbitrage traders taking advantage of the price difference.
• Meaning, the pool now contains 2 ETH ($6,000) and 6,000 USDT ($6,000).
• As per the above, the yield farming pool is still worth $12,000 but has just 2 ETH instead of the 3 ETH that was initially deposited.
• In turn, the investor will have made an impermanent loss of 1 ETH.

It is important to note that the investor will also have received their share of trading fees on ETH/USDC positions. Considering ETH/USDC is a high liquidity pair, these fees may have covered the impermanent loss. But this isn't always the case.

Ultimately, impermanent losses consider what the investor would make had they opted against yield farming. For instance, in the example above, the investor would have benefited from ETH increasing to $3,000 from $2,000 had they held the tokens in a private wallet. But because they deposited the tokens in a yield farming pool, they likely lost money.

This is why yield farming is considered such a high-risk investment product. Instead, many investors will opt for staking platforms like eToro. In doing so, only one token is required when making the investment. Moreover, if the value of the token increases while being staked, the investor will benefit financially.

Cryptoassets are a highly volatile unregulated investment product.

Yield Farming vs Staking

Yield farming and staking have many similarities. For example, both enable investors to earn passive income on idle crypto tokens. Furthermore, returns are based on multiple factors, including the token's market value being staked or farmed.

However, there are also some clear differences between the two. As noted, staking only requires the investor to deposit one token. This alleviates the risk of impermanent losses. On the other hand, yield farming requires the investor to deposit two different tokens. This is because the tokens form a trading pair.

Another difference between the two is how passive income is generated. In the case of staking, the platform will usually use the funds to facilitate crypto loans. The borrower will pay interest on the loan and the investor will receive their share.

Yield farming tokens are used to provide exchanges with liquidity. In turn, investors make money from trading fees that are collected from the respective pair. Remember that staking and yield farming both come with a high degree of risk. While rewards can be unprecedented, so can the losses.

Best Yield Farming Crypto List

In this section, we explore the best pairs for yield farming.

Note: All of the yield farming pairs discussed below can be accessed via the OKX DEX. This is because OKX offers aggregator services, meaning it can connect to dozens of leading yield farming platforms.

USDT/WBNB

Both Tether (USDT) and Wrapped BNB (WBNB) are solid tokens with high liquidity and trading volumes. This makes the USDT/WBNB ideal for yield farming. Currently, this yield farming pair offers an APY of 19.4% on SushiSwap.

Do note that the pool currently has just over $70,000 in TVL. This means that a large investment would allow the investor to control a sizable percentage of the pool.

WETH/USDC

Another popular pair for yield farming is Wrapped Ethereum (WETH) and USDC. This pair is currently available on SushiSwap with a huge TVL of $13.5 million. Yields depend on which blockchain network the investor opts for.

An APY of 5.5% can be achieved when opting for Arbitrum. While the Ethereum blockchain pays just 2.4%. Nonetheless, all three pools offer high levels of liquidity, offering a more stable yield farming process.

USDC/USDT

Looking to make money from yield farming and want to reduce the risks of volatility and impermanent loss? If so, it's worth considering a yield farming pair that only contains stablecoins.

USDC/USDT is a great option here, both of which are pegged to the US dollar. When adding liquidity to this farming pair on Uniswap, a yield of just over 1% is available. Currently, the pool contains a TVL of nearly $23 million.

ACID/ETH

Investors with a high-risk appetite will need to consider micro-cap tokens when targeting the highest yield farming rewards. A good example of this is ACID/ETH. Currently, ACID Token carries a market capitalization of just $4.2 million.

In turn, it's possible to get a huge APY of 89% on ACID/ETH. This pair is listed on the Camelot protocol via the Arbitrum network. A TVL of over $452,000 is currently available.

BTC/ETH

Looking to earn passive income on both Bitcoin and Ethereum? BTC/ETH is a popular liquidity pool that is available across many of the best yield farming crypto platforms.

We found that the highest yield on offer is currently 3.2%. This is available at SushiSwap, and the TVL is $430,000. At SushiSwap, this pair operates on the Fantom network.

Is Yield Farming Crypto Worth it?

Like many crypto investment products, yield farming has its pros and cons. The main benefit of opting for yield farming is that returns can be significant. But there are many factors at play that will determine rewards. As noted, this includes the value of the two tokens in the respective pool.

With that said, many investors prefer staking over yield farming. Returns are more stable, and only one token needs to be deposited. Most importantly, if the token deposited increases in value, this will directly benefit the investor. The same can't be said for crypto yield farming.

Best Yield Farming Strategy

There is no one-size-fits-all solution when exploring the best yield farming strategy. Ultimately, the strategy will depend on the investor's risk appetite and financial goals.

For instance, an investor with a lower tolerance for risk will likely be more suited for yield farming pairs that only contain stablecoins. In theory, this removes the risk of impermanent loss and volatility. Although stablecoins are never risk-free, as seen with Terra USD. But when compared to conventional cryptocurrencies, the risks are typically much lower. In turn, APYs on stablecoin yield farming will be modest.

At the other end of the scale, investors with a high appetite for risk might consider a yield farming pair containing a new or low-cap crypto. This will present the best chance possible of making sizable returns. But equally, the risk of impermanent loss is extremely high.

A good middle ground is to consider yield farming pairs that contain two large-cap tokens with an established track record. Examples in this category include Ethereum, Litecoin, Bitcoin Cash, Solana, and Cardano.

Irrespective of the chosen pair, it is important for investors to diversify. This is more challenging when opting for yield farming over staking. After all, each chosen pool requires an equal amount of two tokens. In comparison, staking pools usually allow investors to deposit any amount.

Is Crypto Yield Farming Taxed?

As we explain in our guide on how to avoid crypto taxes, yield farming is typically considered 'income' in most countries. This means that the yield farming rewards will be added to the investor's income for the year they were received. In turn, this can push the investor to a higher tax bracket.

Moreover, the amount that needs to be added to the investor's income is determined by the value of the tokens when received. Remember that the amount withdrawn from a yield farming pool will vary depending on market forces, so this makes things even trickier.

For example, suppose that an investor originally deposits 10 ETH and 1 BTC into a farming pool. When a withdrawal is made, they get the same amount back. However, the value of both ETH and BTC has increased by 50%. This means that the reported income should be based on the higher value.

On the flip side, investors making a loss from yield farming (even if the token values have increased) will likely be able to make tax deductions. This is because the investment resulted in a loss.

Is Crypto Yield Farming Legit & Safe?

In most countries, DeFi services like yield farming and staking are legal. However, investors should ensure they are well-versed in the risks of yield farming before proceeding.

This includes researching the chosen yield farming platform. In most cases, there is no requirement to deposit funds into the platform itself when using a DEX like Uniswap or SushiSwap. Instead, the tokens are deposited into a smart contract, meaning the provider cannot personally access the funds.

However, if there is a vulnerability in the smart contract itself, the funds could be at risk. Moreover, due to the high-risk nature of yield farming, there is always the chance that investors will lose some or even all of their money. This can happen if the tokens being farmed witness a sizable devaluation.

Ultimately, it might be best to stick with a regulated platform that offers staking. At eToro, for example, investors can earn staking rewards on Ethereum, Cardano, and Tron. There are no lock-up periods, and investors can withdraw their staked tokens anytime. Most importantly, eToro is regulated by multiple financial bodies.

Conclusion

In summary, we ranked and reviewed the best yield farming crypto platforms. While yield farming offers the potential to earn unprecedented rewards, the risks can be super-high.

Instead, many investors will opt for staking. This requires investors to deposit just one token, rather than needing to fund a trading pair at equal amounts.

We found that eToro is the best place to engage in crypto staking. There is no requirement to opt-in, and rewards are updated every 24 hours. Plus, eToro is a regulated platform enabling investors to cash out their staked tokens without meeting a lock-up period.

Cryptoassets are a highly volatile unregulated investment product.

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Written by Kane Pepi | Editor

Kane Pepi is an accomplished financial and cryptocurrency writer who has an extensive portfolio of over 2,000 articles, guides, and market insights. With his expertise in specialized subjects such as asset valuation and analysis, portfolio management, and financial crime prevention, Kane has built a reputation for providing clear explanations of complex financial topics. He holds a Bachelor's Degree in Finance and a Master's Degree in Financial Crime, and is currently pursuing his Doctorate degree, which focuses on investigating the complexities of money laundering in the cryptocurrency and blockchain technology sectors. Kane's wealth of knowledge and experience in the field make…

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