A follow-up on the smart contract
- DONs in Yield Farming
As we said in our previous thread/post that DONs aim to offer the oracle resources with strong confidentiality, integrity, and accountability
With The DONs application, developers can create efficient off-chain data for their smart contract
Decentralized oracle nodes aid the functionality of how major yield farming services in the Defi space works
These DONs serve as a main source of trusted feeds to either staking or Dexs in Defi.
-The role of DONs in Yield Farming
Before looking at how DONs help in scaling the functionality of some stablecoin
Let's look at the meaning of yield farming
Yield Farming is a process of putting your Crypto in the most optimal spot so that it will earn you more free crypto.
'Yield' is a financial term that means what you get in investing, while the term 'farming' is used because it represents the possible exponential growth you can receive by finding the right place to invest in. We can simply say yield farming is figuring out the best place to put your money to seek a higher return
There are different methods of yield farming, but for the sake this post, we will only discuss three of them.
i. Liquidity providers: This involves the supplying of coins or tokens to a DEX and in return, the exchange takes a very small fee for all the trades happening in the platform and gives it back to the trader.
ii. Borrowing and lending: it involves the lending out of your asset to borrowers and in exchange for rewards.
iii. Staking: it's a form of yield farming that involves buying a coin and staking them to earn rewards, this can be done i.e your coins are being used as a means of incentivizing the blockchain validators.
We could have done an intensive look into all of these yield farming options, but we will leave that for a separate post in the future
- How DONs achieve the Oracle function for yield farming
Decentralized yields farming platforms like @AAVE, @Compoud, @Euler, @ Loopring, @Stafi @Morpho_Ave, and more use chainlink DONs to fetch in some data feed to achieve the following:
i. To grant user's reward for participating in the platform
ii. To create a zone of predictability for user's
iii. To introduce a verifiable randomness function for an additional gamification feature
DONs can achieve each of the above-highlighted functions through the below simple process
- First Data is pulled from centralized and decentralized exchanges like @Binance, @coinbase, @Uniswap, @shushiswap
- Which is then received by the chainlink network nodes and aggregated, which then delivers it to on-chain data price feeds
- Then the chainlink network nodes feed the price feeds into the liquidity pool, which then serves the trader performing a swap on the platform or the liquidity providers.
With the chainlink price feeds using DONs, the yield farming protocols can ensure a fair distributor of liquidity mining rewards according to the market pricing.
