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Questions and Answers
What is one of the main benefits of using tokens to generate yield?
What is one of the strategies used to generate yield?
What is one potential downside to generating yield with tokens?
What should be kept in mind when generating yields with tokens?
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What is the goal of yield opportunities?
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What is one strategy to help soften the blow of price declines?
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What is impermanent loss?
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What is one way to manage yield opportunities?
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What is one way to reduce risk when generating yield?
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What is one example of a yield opportunity?
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Study Notes
- The DeFi space provides opportunities to use tokens to generate high yield.
- Yield opportunities come in many forms, including strategies like staking a token to secure a blockchain, providing liquidity to decentralized exchanges, and lending to other crypto users.
- Over time these yield opportunities allow you to accumulate more tokens, which helps soften the blow of price declines and improve your long-term results.
- While getting double-digit yields on many tokens is possible, you must understand that yield opportunities come with different levels of risk and reward and that rates change over time.
- Additionally, some yield opportunities include a mix of several tokens, which affects portfolio allocation over time and may cause what’s known as impermanent loss.
- That said, these are some things to keep in mind when generating yields with your tokens:
- Generate yield from several different sources to diversify your risk.
- Avoid yield opportunities that include tokens that you wouldn’t hold otherwise.
- The higher yield you are targeting, the more actively it needs to be managed.
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Description
Test your knowledge on maximizing yield opportunities in the DeFi space through strategies like staking, providing liquidity, and lending to other crypto users. Understand the risks, rewards, and the importance of diversification in yield generation.
