Yield farming is a way for you to earn Bridge$ in exchange for staking your LP tokens. This incentive brings more liquidity to Bridges Exchange.
Project teams must apply for farms in order for them to be created, and the decision on which farms to offer and for how long is taken based on performance of the token and competing demand with other projects.
Staking your LP tokens in a farm is free—you don't have to pay any fees to access the farms.
Yield farming is a great way to put your tokens to work in exchange for additional passive income. By providing liquidity, you're already earning rewards based on liquidity provider fees. In addition to those rewards, you can also put your LP tokens into an active yield farm to earn Bridge$.
For each block that is completed on the blockchain, 0.1 Bridge$ will be distributed to the farms. Given that BNB Chain creates ~28,500 blocks every day on average, an estimated 2,850 Bridge$ will be distributed daily.
Farm rewards are distributed to the overall pool of farms. Multipliers are used to split the rewards among the different farms. So what do the multiplier numbers mean? Let's take a look at two examples.
First imagine that there are two active farms each with a 1x multiplier. In this scenario, the farms are considered equal, so the rewards will be split 50:50 between the two farms.
Now consider the scenario in which there are two active farms. One has a 7x multiplier, and the other has a 3x multiplier. In this case, the rewards will be divided so that 70% are distributed to the 7x farm, and 30% of the rewards are distributed to the 3x farm.
Multipliers are used to divide the rewards per block and to prioritize certain farms. The amount of Bridge$ released to the overall pool of farms at each block will be constant. Having a farm with a 10x multiplier does not mean that farm will be distributing 0.1 * 10 Bridge$ per block.
A farm's total APR is the sum of the base APR and the LP reward APR.
Each farm has abase APR which is calculated according to the farm multiplier and the total amount of liquidity in the farm. The base APR determines how many Bridge$ are distributed to each participant of the pool.
LP reward APR
The LP reward APR is the APR earned from the liquidity provider fee rewards. We can calculate this by dividing the yearly fees by the liquidity.
Let's use an example to understand this. For a liquidity pair, let's say we have the following:
Liquidity: $10 million
24-hour volume: $3 million
7-day volume: $20 million
First, we calculate fee share with the 24-hour volume given the 0.25% liquidity provider fee on Bridges Exchange. That's $3,000,000 * 0.25% = $7,500.
Now, we can use the fee share to estimate the projected yearly fees earned by the entire farm based on the 24-hour volume: $7,500 * 365 = $2,737,500.
Finally, calculate the LP reward APR using the liquidity: $2,737,500 / $10,000,000 = 27.38%.
You can then use this to calculate the total APR by adding the potential earnings from the farm rewards (base APR) to the LP reward APR.
The rewards shown in the ROI calculator are purely based on the current rates in terms of volume on a particular liquidity pool and the Bridge$ price. Since volume in that specific pool as well as the Bridge$ price are subject to change over time, the ROI calculator can only be used as a rough estimate of your rewards.
How often should I collect my rewards?
It's up to you how often you want to collect your rewards. They do not expire or disappear if you don't collect them. Just be aware that as with any transaction in blockchain, gas fees will need to be paid on the transaction to collect the rewards. You can see how much that fee is when your wallet asks you to confirm the action. It's a good idea to check that the amount you are withdrawing exceeds the gas fees.
BRG.X-BNB farm's unique benefits
Each address—whether it is a wallet or a smart contract—is paid dividends based on the amount of Bridge$ that it is holding. If you farm the BRG.X-BNB pair, this means that you are already receiving the liquidity provider fees and the dividends based on the amount of tokens you provided to the liquidity pool.
While all of the other farms will be receiving Bridge$, the BRG.X-BNB farm will also receive dividends on the Bridge$ that it holds. Those dividends are then redistributed by the farm according to the amount of LP you are farming.
What happens to the LP dividends?
Technically, while you are farming you are not holding the LP tokens in your wallet. The farm contract is holding those LP tokens instead, so you may wonder if your dividends from providing liquidity get lost. This is not the case. Instead, you will now have two sources of dividends from Bridge$ tokens.
The portion of dividends accumulated by the LP tokens that are held by the farming contract will be redirected to the farming contract itself. The farming contract will then redistribute this portion of dividends to the people participating in the farms. They will be proportionally redistributed to each person according to their percentage of LP tokens staked in the farm.
Suppose Alice and Bob are providing liquidity, equivalent to 50 BRG.X each, and they get back 50 LP tokens each.
Now there are 100 BRG.X in the liquidity pool and 100 LP tokens circulating. Each time the LP contract receives dividends based on the 100 BRG.X that it's holding, those dividends are redistributed 50:50 to Alice and Bob.
Now Alice decides to farm her LP tokens. What we have now is Bob holding 50 LP and the farming contract holding Alice's 50 LP. Is Alice missing out on her share of dividends as liquidity provider?
No. That portion of dividends will be sent to the farming contract which will redistribute them to the people participating in the farm. In this case, Alice is the only one in the farm, so she will get back the same amount at a 1:1 ratio. The principle also holds if there are others staking LP tokens in the farm. Each person will still get the same amount of dividends as holding the LP without farming.
In this scenario, if the LP contract receives 1 BNB, 0.5 BNB will be redistributed to Bob and 0.5 to the farming contract—thereby to Alice.
So where is the compounding effect?
Did we mention that every address holding Bridge$ will receive dividends? The farming contract is no exception.
Let' say the farming contract is holding 100 Bridge$, and will be receiving its own portion of dividends based on this. Every time the contract receives dividends, they will be redistributed proportionally to the amount of LP token that you are farming.
Now Alice will get the dividends coming from the LP contract, and the dividends generated by the 100 Bridge$ held by the smart contract. If that portion is 1 BNB, then Alice will get 0.5 + 1 BNB.
Just like all of cryptocurrencies and DeFi, yield farming is not without risk. It is possible that your tokens may lose value, or even that you may be exposed to impermanent loss.