Yield Farming Basics
How does a yield farm work?
A yield farm holds your deposited tokens in exchange for a share of the emissions of the farm's native token. The return on your investment is derived from the price of the native token, your share of the liquidity in a pool/farm, and the percentage of total emissions that go to that pool.
But how are the rates so high??
The APRs in a yield farm are directly linked to the native token value. If the native token is performing strongly, farming will be very profitable!
What is a multiplier?
The multiplier on a pool is the relative share of total emissions that go to that pool.
  • For instance, if there are 10 pools, and 9 of them have a 1x multiplier, and the 10th has a 10x multiplier, each of the pools with a 1x multiplier would receive 1/19 of the total emissions of the farm.
Why is the APR on the house token so high?
The house token receives a large multiplier to incentivize holding. Native tokens are typically the highest risk with the highest potential reward in a yield farm. There can easily be large pumps due to a yield farm's growth, but there can also be large dumps when people want to pull out their profits. Timing is important, and so is risk management. As with any other investment in cryptocurrency, never invest more than you are willing to lose in native tokens!
I just deposited into a pool/farm and the APR went down?
Before depositing into a farm, check the liquidity. When you deposit, you will be diluting this liquidity.
  • APR = oldAPR * liquidity / [liquidity + deposit]
How do I add and remove liquidity to Liquidity Pools (LPs)?
While platforms may have user interfaces which looks slightly different, and you should always refer to the guidance provided the platform itself, the process usually follows some version of the below.
Adding liquidity:
  1. 1.
    Have a compatible wallet - Metamask is what most people use.
  2. 2.
    Have some FTM for gas fees. Remember to always keep some FTM in your wallet if you are entering FTM LPs, i.e. don't add all the FTM tokens you have in your wallet or you will not have gas for transactions.
  3. 3.
    Go to the platform of your choice and connect your wallet. Double check it is not a spoofed address. If you are using search engines to find exchanges the first hit (often presented as an "ad") is sometimes a fake.
  4. 4.
    Decide what tokens you want to pair, and if you don't have the tokens in your wallet already you will need to buy them.
  5. 5.
    Find the section titled "Add Liquidity" or similar in the user interface.
  6. 6.
    If you have not created an LP on the platform before, you will be asked to approve spending limits for each token.
  7. 7.
    Once you have approved the spending limits, you can deposit the tokens to the LP. It will need to be an equal value in USD of each token, otherwise you will not be able to create the LP.
  8. 8.
    The tokens you have paired will be deposited into the LP and in return you will receive "LP tokens" which represents your share in the LP. These tokens can in turn be entered into yield farms like Trick or Treat.
Removing liquidity:
  1. 1.
    Withdraw your LP from yield farms like Trick or Treat.
  2. 2.
    Go to the platform you created the LP on and connect your wallet.. Make sure you have enough FTM for gas.
  3. 3.
    Find the section to remove liquidity. Typically removing liquidity takes place in the same interface as adding it (e.g. for Spookyswap it is under Liquidity/"My potions").
  4. 4.
    You should be able to see your LP in the interface. If not, you may need to click "Import" following the steps provided in the platform.
  5. 5.
    Withdraw the amount of LP you wish - usually this is expressed as a percentage.
  6. 6.
    Once you have withdrawn your LP, you will receive your tokens. The exact number of tokens that the LP returns to you may not be the same as when you deposited, owing to Impermanent Loss (see the Risks section for a description of this), any fees deducted by any protocol/yield farm you deposited the LP in after creating it, or any LP shares added to it through auto-compounding platforms.
It is good practice to revoke spending limit approvals for any Defi protocols you no longer intend to use. This can be done e.g. through https://debank.com/ by connecting your wallet, entering your profile and clicking the approvals tab, then revoking the relevant approvals. The blockchain scanner at https://ftmscan.com/tokenapprovalchecker is another option.
For Spookyswap LPs, please also have a look at the guidance provided in their docs:
For Spiritswap LPs:
Add Liquidity
We will continue to build this section out over time, but in the meantime, always feel free to ask questions in our TG or Discord.
Copy link