One of the best ways to put your money to work and earn consistent, passive crypto income is through yield farming. And BSC (Binance Smart Chain) is among the best chains for yield farming due to its low fees, fast transaction confirmation times, and high yields.
In this post, I will be giving you a complete, beginner-friendly guide to yield farming on BSC.
With this article, I hope to help even a complete newbie buy their first-ever crypto and start farming on BSC all by themselves.
NOTE: Farming on BSC does come with a lot of “processes” or steps, especially if this is your first time. But as you get used to it, it becomes normal and faster.
The complete guide to yield farming on BSC
I will assume that you have no wallet or any cryptocurrency.
And that you have just heard about crypto and how yield-farming is making people “rich” and you want to have a taste of this sweet, magic internet money.
Whether this assumption is true or not, you’ll find this guide helpful and probably interesting.
So without wasting much time, let’s get started.
First the steps:
- Create a wallet
- Create a Binance Exchange account
- Buy your first crypto on Binance
- Add liquidity to a pool
- Do more with your LP token
- Removing liquidity and cashing out to fiat
A step-by-step guide to yield farming on BSC
1. Create a Wallet
The first thing you need is a crypto wallet.
A crypto wallet is exactly what the word means. A place to store and manage your cryptocurrencies.
You can do a lot with a good DeFi-enabled crypto wallet aside from the basic functions of storing, receiving, and sending your cryptocurrencies.
Most wallets enable you to interact with decentralized applications (dApps) such as decentralized exchanges and other protocols.
For the purpose of this guide, we would be using the Trust Wallet and the Binance Chain Wallet browser extension for PC.
Click on the above link to get the latest version of the Trust Wallet App for your mobile device and the Binance Chain Wallet extension for your browser.
I know you may need help with creating a wallet. Don’t worry, I got your back.
- Click here for a guide on how to create a Trust Wallet account
- Click here for a guide on how to create a Binance Chain Extension Wallet
Preferably, you should import the Trust Wallet seed phrase to the Binance Chain extension wallet so that you have the same wallet on your mobile and PC and you can switch devices easily.
The instruction on how to do that is in the Binance Chain Wallet creation guide, linked above.
2. Create a Binance Exchange account
Binance is the largest and arguably the best cryptocurrency exchange in the world and you need it to be able to easily buy and sell your crypto with fiat.
But that’s not the only reason why you need a Binance exchange account.
Each smart contracts blockchains such as Ethereum, Binance Smart Chain (BSC), Solan, etc all have their own token standards.
For example, tokens that are created on the Ethereum blockchain are referred to as ERC20 tokens. On BSC we have BEP2 AND BEP20 tokens. And on Solana, it’s SPL tokens.
You need Binance to convert any token or coin to their BSC-compatible (BEP20) version that you can use on Binance Smart Chain.
You cannot use BEP2, ERC20, tokens directly on BSC unless you convert them first to BEP20 and that’s where Binance can help.
However, if you don’t want to use Binance Exchange due to the fact that it’s centralized and you don’t want them to hold your money for even a few minutes, then you may also use the Binance Bridge.
3. Buy your first crypto on Binance
You can buy your first crypto on Binance or from anywhere else and transfer it to your Binance account.
The most important thing here is that you need to run that fund through Binance so that you can send it from there to your wallet as a BEP20 token to use on BSC.
Once you have funds in your Binance account, use it to buy BNB and withdraw the BNB to your wallet as a BEP20 token.
4. Add liquidity to a pool on any AMM of your choice
Now that you have BNB in your wallet it’s time to connect to a reliable AMM and buy the token you want to start farming.
For the purpose of this guide, we would be using PancakeSwap.
Let’s assume you have $10,000 worth of BNB that you want to use in starting your farming activity on BSC.
Let’s assume again that you want to farm in the AUTO/BNB liquidity pool. You would be required to buy $5,000 worth of AUTHO and leave the rest of the money in BNB.
But for me, in order to leave some BNB for fees, I would probably buy $4,995 of AUTO and leave the rest in BNB.
Once you have your AUTO and your BNB all that’s left is to add them to the AUTO/BNB liquidity pool on Pancakewap.
Once you do that, you will be issued a liquidity provider token (LP token) which serves as a receipt for the funds you deposited.
Now you will begin earning a share of all transaction fees collected from the AUTO/BNB pool on PancakeSwap.
In order to get your BNB and AUTO token back, you will need to provide the LP token back to the smart contract. And then your funds will be released back into your wallet.
5. Do more with your LP token
The rewards you earn by farming in any liquidity pool is your share of all the fees collected from traders buying and selling from that pool.
If you own 1% of all funds in the pool and the daily fee generated is $10,000 you will earn 1% of the $10,000 which is $100 in BNB and AUTO.
You will be able to claim this reward only when you withdraw your funds from the pool.
But you can earn even much more, and faster too if you take your LP token and deposit it in a yield optimization protocol such as Autofam Network.
Yield optimizers compound your earnings multiple times a day. This is why you’re able to earn higher APYs with them.
6. Removing liquidity and cashing out to fiat
If a farm is no longer profitable for you or you’re no longer confident in the future of the project, you may remove your liquidity.
First, you withdraw your LP token from any yield optimization protocol where you had deposited it.
Then remove liquidity from PnancakeSwap.
Once done, your original capital and all the rewards you have earned will be credited to your wallet.
You can then sell your token (in our example, AUTO) to BNB and send it to your Binance account. Or move it into a different and more profitable pool.
If you wish to cash out, all you have to do is send the BNB to Binance.
Then sell it to any other coin you want and cash out out your money in your local currency.
There are many other ways to cash out into your local currency as you will find out in the below article.
Conclusion
Yield farming is currently the hottest trend in crypto.
So much money is being made (and lost) and a lot more are still pouring in from both individual and institutional investors.
One of the fastest chains championing this growth is the BSC with its low fees, fast block confirmation times, lucrative yields, and strong leadership
However, I must admit that DeFi, yield farming, and crypto generally is still far from being user friendly.
The long and complicated process to yield farming will remain an entry barrier for the foreseeable future.
What’s your yield farming experience on BSC. Share with us in the comments section below.