Harvest is traded on more than 30 trusted platforms including Uniswap, Polygon,Compound, Lido, Sushiswap, and Curve — all while giving crypto investors theopportunity to compound interest and earn rewards hands-off while Harvest Financedoes the hard work behind the scenes.
So, let’s talk Harvest Finance — what it is, what to know about it, and how you can useit.
What Is Harvest Finance?
Harvest Finance (FARM) is an automated Ethereum-based “Defi” (decentralized finance) farming protocol that allows users to generate extra income (i.e., “yield”) and earn interest on their existing crypto investments.
It does this by aggregating digital assets into decentralized lending pools that in turnprovide liquidity to other crypto borrowers looking for loans.
Since its founding on September 1, 2020, Harvest has become one of crypto’s trendingaggregators automating the process of “yield farming” which locks up crypto assets intosmart-contract-basedliquidity pools to generate rewards.
This puts crypto investors’ otherwise idle assets to work through auto-compounding,auto-harvested rewards, proprietary rewards, as well as unique DAO (“decentralizedautonomous organization”) token rewards.
The History of Harvest Finance
Harvest Finance officially launched its platform and the FARM token in September 2020anonymously with zero circulating supply and without any venture capital funding orpre-mining. Within days it quickly became one of the most talked about and top-ratedDeFiblockchain platforms on Ethereum.
Since its launch Harvest has continued to expand its user base and grown internally aswell including integrating with Yearn Finance in December 2020, another leading DeFiprotocol, which allows users to swap assets and rewards.
How Does Harvest Finance Work?
Crypto investors both new and experienced frequently feel overwhelmed by thevolatility of the markets, the speed at which the DeFi landscape is evolving, and theconstantly expanding array of coins, tokens, and other digital assets to bet on.
Harvest Finance was founded to create a lower-risk middle ground for first-time cryptoinvestors to get into the game while offering experienced crypto investors a way todiversify their portfolios in order to expand their digital wealth.
From a practical standpoint, the foundation of Harvest Finance is its smart contract “vaults,” which store digital assets that generate yields for users who deposit ERC20 tokens into them.
The earnings from each vault (of which there are currently more than 30) are thenautomatically redistributed to Harvest users based on their share of the pool, withoutany additional work needed on the part of the user.
This makes for a passive crypto income stream either through accrued interest orrewards depending on the pool.
What Is the FARM Token?
Harvest’s Ethereum-based FARM token powers Harvest’s protocol, moving investors’otherwise idle crypto funds around the DeFi-verse in real-time through staking andfarming in order to generate yields and hedge against market downturns.
Harvest’s FARM token is also a governance token rather than a utility or commoditytoken, which means it confers on users the rights to vote on the direction of the existingHarvest protocol as well as on proposals regarding its future direction.
FARM tokens are also proportional, so the more FARM tokens a user stakes, thegreater say they have on the future of their investment and the Harvest protocol.
From an interest and lending standpoint, Harvest’s FARM tokens can also be leveraged as collateralfor lenders to borrow from in addition to earning interest.
Functions of the FARM Token
Harvest Finance’s FARM token offers crypto investors a low-risk, “wide net” way to earn yields and maximize returns on their existing crypto assets.
It does this in three ways:
Through the Harvest protocol
staking pool which allows users to “stake” their crypto assets and generate interestfrom the pool’s underlying investments
By serving as a lending platform for other users and earn interest on those loans,and
Functioning as a trading platformfor ERC20 tokens and crypto as well as traditionalfiat currencies
How To Use Harvest Finance
Harvest Finance is an exciting way to get involved (or more involved) in the cryptoscene. That said, having some knowledge of the Ethereum blockchain andsmart contracts will be massively helpful before diving into Harvest.
Wallets
Let’s start with wallets. To use any cryptocurrency, you need to have a crypto walletfirst — FARM tokens are no different. With a crypto wallet, users can send and receiveEthereum and other cryptocurrencies from a unique and transparent digital address.Harvest reports that its users primarily use a MetaMask browser extension for this,though WalletConnect is another option.
GAS Prices
Next, GAS prices matter — yes, even in the crypto world. Ethereum contracts must bemined before they are validated and incorporated into the blockchain. However, smartcontracts each have different levels of computational complexity (GAS), so most usersdeal with this by setting a GAS price.
That’s what GAS prices are in crypto — a small tip for the miner who verified thetransaction. Just as gasoline prices are necessary to fuel your car's engine, GAS pricesare necessary to fuel the engine of the Ethereum blockchain.
GAS prices, essentially, are attached to transactions, and miners follow higher GASprices to decide where to focus their mining efforts. Typically, the higher the GAS price,the faster the transaction will get mined, though exact time and price estimatesfluctuate.
Harvest offers extraordinarily complex smart contracts relative to other platforms. As aresult, Harvest may seem to have distinctively high GAS prices for deposits andwithdrawals.
Another thing to remember is that, especially if you’re just getting started, it’s generallynot worth it to fiddle with the automatically generated GAS costs. Most wallets do thecalculation for you. If you make your own changes, you may end up paying transactionfees only to see your transaction fail.
Getting Connected
From there, connecting is relatively straightforward. You’ll need to set up a crypto walletor use an existing one and connect it to your Harvest account. This connection, again,is most commonly handled either through a MetaMask extension or WalletConnect.
Once you’re connected, Harvest should automatically detect your assets. At this point,you should be good to go.
However, as you begin transactions, keep the fluctuating GAS price in mind.
What Are the Advantages of Harvest Finance?
Earning Interest
No matter which side of the finance system you’re invested in — traditional or digital —everyone wants their money to work for them, not the other way around. That’s whyearning passive interest on your existing crypto assets is Harvest’s biggest selling point.
Harvest Finance offers its users the ability to earn regular, accruing interest on their existing crypto holdings by lending them out to other investors through Harvest’s digital “pool.”
Harvest’s interest rates, while adjusted dynamically based on a real-time assessment ofsupply and demand, ensure a competitive return relative to other more traditionalinvestment vehicles.
Access to Liquidity
Harvest Finance provides access to liquidity for its users through its decentralizedexchange (DEX). In other words, you can easily convert your cryptocurrency into otherassets, such as fiat currency or stablecoins, without going through a centralizedexchange.
Low Fees
Harvest Finance charges low fees for its services. For example, theprotocol’s transaction fee is only 0.03%.This is significantly lower than the feescharged by centralized exchanges, which can be as high as 3%.
What Are the Risks of Harvest Finance?
Lack of Customer Support
Whenever it comes to investing money, everyone wants someone to talk to when itlooks like the market’s going south, or at minimum, if they just have a simple questionabout how their investments are being deployed or how to protect themselves from thenext volatility swing.
Unfortunately, Harvest Finance doesn’t have a customer support team either on the phone or online. So, if you’re having problems with the protocol, wondering what’s happening to yourmoney, or just have technical questions, the Harvest community is the only place thatyou can go for help.
Whether you’re a novice crypto investor or have been in the game for years, being ableto reach someone associated with the fate of your investment not only gives peace ofmind for some, but is a dealbreaker for others when it comes to where they put theirmoney.
Security
Unless you still like to save your money by hiding stacks of U.S. dollars under yourmattress or cutting holes into your walls, every digital currency and DeFi protocol runsthe risk of being hacked.
And even though Harvest is built on the Ethereumblockchain — which is one of theoldest, safest, and most proven — it’s not fail-safe.
All blockchain protocols are vulnerable to hackers, which means your digital assets are as well.
Additionally, “smart contracts” come with their own vulnerabilities as well, especiallywhen third parties trusted or not haven't audited the protocol.
Volatile Interest Rates
Like all interest rates on any investment digital or otherwise (Federal Reserve mortgagerate hikes anyone?), Harvest’s interest rates are prone to wild swings and not locked inlong-term like a 30-year mortgage or the yield on a 10-year treasury bond.
That means that one day you could be earning interest on your Harvest investment thatwill make you feel like an overnight millionaire. The next day, however, you could bemaking nothing at all or losing what you’d just earned the day before just as fast.
The Future of Harvest Finance
As a platform and aggregator, most crypto exchanges and analysts are bullish onHarvest Finance’s plans for growth and expanding its user base. And its ever-expandinguser base and increasing market cap signal that it’s becoming a major up-and-comingplayer in the DeFi space.
Harvest Finance is capitalizing on the desire from crypto investors to diversify theirportfolios beyond just Bitcoin and NFTs into managed portfolios and diversifiedinvestments.
The company’s first mover position as an aggregate “yield farmer” in the DeFi spacecould also be a game changer.
