Before you start earning from farming, it is important to choose a token pair to send to the liquidity pool. We will tell you in detail how to do it and what to pay attention to.
Good reputation — minimal risks
We’ve already talked about the risks that are present when you invest in farming. In farming, «impermanent loss» (IL) is a situation that occurs from time to time among farming investors.
That is, IL — the risk of losing money in the event of significant fluctuations in the exchange rate of one currency pair against another — can happen to your currencies. In this case, you will withdraw not the funds that you invested, you will not earn, but you will lose.
You can avoid such losses by choosing currencies for token pairs:
- with a relatively stable exchange rate
- well known among crypto enthusiasts and specialists in the crypto world
- with a high project capitalization
- high-tech and scalable blockchains that are actively developing and attracting developers
- promising projects
- with a good reputation in the media
- one of the pair’s currencies is stablecoin
Studying the table, looking for yield
Once you have decided which tokens you consider suitable for investment, you need to get acquainted with the table of farming characteristics.
Let’s analyze it on the example of the TONSwap.io exchange.
Consider the APY column, which shows the annual yield when investing the pair. This is a number to guide your investment, but it is not constant and changes over time.
You choose an investment pair taking into account possible risks and APY levels. Of course, more stable assets have lower yields. And little-known assets offer to invest with a high APY.