The Future of Leveraged Yield Farming in DeFi

What to expect in this highly profitable industry in the months and years to come

Baker Finance
2 min readMay 11, 2022


One of the most important aspects of leveraged yield farming that stands out is how it allows users to construct advanced strategies through shorting and hedging. In other words, users can create substantial yields while holding short or even market-neutral positions by using intelligent leverage and position customization. This has a significant implication: leveraged yield farming allows you to yield farm economically in bear markets.

Apart from capital efficiency, leveraged yield farming solves another important issue in yield farming: sustainability, or more particularly, yield farming’s lack of sustainability in various market conditions.

To provide liquidity and yield farm on all other yield farming platforms, you must normally have long-only holdings of tokens. That means that in bear markets when prices are falling, the yields may not be enough to compensate for the equity losses incurred by holding the tokens. Leveraged yield farming platforms are a potential solution to this problem, and they may be incorporated in a few DeFi havens where yield farming is still profitable during a bad market.

Choose your Strategy

As you can see from the above, leveraged yield farming offers a one-of-a-kind opportunity to earn among the greatest yields on your crypto assets in DeFi. Furthermore, the methods can range from conservative (farming stablecoins or hedging pseudo delta-neutral) to high-yield, high-risk speculative (levering long and shorting), making them appealing to a broad variety of consumers.

Because much of the yield in leveraged yield farming comes from improved capital efficiency rather than platform token rewards, it is safe to claim leveraged yield farming is one of the most sustainable categories within DeFi.

Leveraged yield farming is also one of the few types of platforms that can be used with collateralized loans. It can do it safely by limiting the use of lent funds for yield farming on integrated exchanges inside the protocol.

The loan application process may be enhanced in the future. Because there are no technical limitations, LYF protocols will be ready to take advantage of new yield sources as they emerge by providing users with on-chain leverage.

In conclusion, leveraged yield farming not only solves significant DeFi issues such as capital efficiency and sustainability but also provides mature products with great earning potential.

Stay tuned for more…

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