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Home CRYPTO

Yield Farming on Cardano: A Step-by-Step Guide Using Minswap

by Sham
December 12, 2024
in CRYPTO, DEFI, FEATURED, GUIDES
Reading Time: 5 mins read
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• Yield farming on Minswap allows users to earn tokens passively.
• Rewards accrue every second, allowing you to harvest them at any time.
• When you stake additional LPTs, any accumulated rewards up to that point are automatically sent to your wallet
.

Yield farming on Minswap allows users to earn tokens passively by providing liquidity to the decentralised exchange (DEX). Here’s a comprehensive guide to get started:

1. Providing Liquidity

  • Choose a token pair on Minswap and add liquidity to its pool, in our case, we are picking the CHAD/ADA pair as an example.
  • There are two methods to provide liquidity to a pool:
    • Deposit (Recommended): You deposit both Cardano token and ADA directly in a 1:1 ratio of their value.
      Example: If the current value of 1 $CHAD is 2 ADA, and you want to provide 100 ADA worth of liquidity, you will need to deposit 50 $CHAD and 100 ADA to maintain the 1:1 ratio.


https://minswap.org

  • Zapping: This allows you to add only one asset of the pair.
    Example: If you zap into the pool with 100 ADA, the system will automatically sell 50 ADA for $CHAD. This means half of your ADA will be used to purchase $CHAD at the current rate, and the remaining ADA and purchased $CHAD will be added to the pool. Similarly, if you zap in with 50 $CHAD, half of the $CHAD tokens will be sold for ADA, and the resulting ADA and remaining $CHAD tokens will be added to the pool.


https://minswap.org/liquidity?

  • In return, you’ll receive Liquidity Provider Tokens (LPTs), representing your share in the pool.

2. Staking LPTs

  • If the token pair has an associated farm, stake your LPTs in that farm to start earning additional rewards.
  • Rewards accrue every second, allowing you to harvest them at any time.
  • Be mindful of Cardano network fees (approximately 0.6 to 1.2 ADA) incurred during each harvest.

https://minswap.org/farm

3. Managing Your Stake

  • Adding more LPTs: When you stake additional LPTs, any accumulated rewards up to that point are automatically sent to your wallet. Your new, larger stake will then start earning rewards.
  • Partial withdrawal: Withdrawing a portion of your LPTs will also trigger the automatic transfer of accumulated rewards to your wallet. The remaining staked LPTs will continue to earn rewards.
  • Full withdrawal: Removing all your staked LPTs will send all accrued rewards to your wallet, and you’ll stop earning further rewards until you stake LPTs again.

Important Considerations

$CHAD Liquidity Pool ID: f5808c2c990d86da54bfc97d89cee6efa20cd8461616359478d96b4c.2307b504ffbe3736893f77d8cfe1118d064c72256911e9367dbee63b6b6b798c

Each deposit or withdrawal creates a pending Harvest UTxO with a 2 ADA fee; approximately 1.5 ADA is returned along with your harvested rewards.

Staking LPTs in yield farming is distinct from ADA staking. It’s non-custodial, meaning your LPTs are locked in a smart contract, and only you can withdraw them.

Every Cardano token has a unique Policy ID. Always double-check this Policy ID before buying tokens or providing any liquidity to a pool, as there may be several tokens with the same name, but never the same Policy ID. Projects usually provide this information in their BIOs, Discord channels, or official websites.

$CHAD Policy ID: 97075bf380e65f3c63fb733267adbb7d42eec574428a754d2abca55b

Every Liquidity Pool also has a unique Liquidity Pool ID. Similarly, double-check this ID to ensure you’re providing liquidity to the correct pool.

Tags: ADACHADLiquidity Provider TokensMinswapYield farming
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