Thread by @redphonecrypto

Top 5 misconceptions about yield farming

>>>1
CLAIM: These tokens are just printing money out of thin air
REALITY: Is that what stocks do when they IPO? When a project launches a new token via yield farming, what's really happening is a token distribution event.

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The goal is to inject tokens into the world without having them labeled securities (no one is technically paying for anything, after all). Farmers get the coins in exchange for loaning out liquidity. That's theoretically better than airdrops. Why?

Farmers now have some skin in the game... they've had to learn about a project and put some time into it. They spread the word. They help it grow.

>>>2
CLAIM: All these projects are failures... Their charts look terrible
REALITY: A new token's price is bid up at launch because farmers must BUY the new token if they want to enter the most valuable pool at large scale (+ there simply aren't enough tokens in the world to buy)

Put another way, it doesn't matter if you're paying 5x or more than a token is worth at launch if you're entering a pool that's paying you 100,000% APY

3
CLAIM: Asshole whales always come in and destroy these projects
REALITY: Whales MUST dump. Why? Every time they harvest new tokens, they're going to have to pay taxes on the value of the tokens at the moment of the harvest. Holding them would be a form of financial suicide

4
CLAIM: You have to buy these tokens early to make money
REALITY: That's how you get rekt. If you're going to buy a yield farm token (and NOT yield farm), do it near the end of the distribution cycle

5
CLAIM: Yield farming is a fad
REALITY: Like everything in crypto, yield farming shows how the right incentives can influence the behavior of strangers around the world. It's here to stay. The form will change, but the magic of incentives won't.