With ApeSwap Yield Farms, users can stake liquidity provider (LP) tokens to earn rewards. The type of reward depends on the type of Yield Farm and the chain.
ApeSwap Yield Farms are designed to primarily incentivize users to provide liquidity for their favorite DeFi projects. Users who create and stake their liquidity provider tokens in a Yield Farm will earn BANANA utility tokens, or partner tokens from another project.
As a DeFi platform, liquidity is crucial to a healthy ecosystem. More liquidity available to ApeSwap means more users can trade hundreds of their favorite tokens at low fees. Therefore, it’s in everyone's best interest to encourage liquidity for popular trading pairs on ApeSwap, because popular trading pairs require more liquidity and generate more trading fee revenue.
For more info on liquidity provider (LP) tokens and how to create them, visit the Liquidity section.
ApeSwap constantly monitors the liquidity available on the DEX to ensure that Yield Farms are incentivizing healthy levels of liquidity for particular tokens pairs. In practice, these incentives are managed through biweekly changes to the multipliers applied to each farm.
Farm multipliers are used to manage BANANA emissions distributed to Yield Farms on a per-block basis. Adjusting the multiplier for each Yield Farm changes the amount of BANANA rewards paid out to users who stake in that Yield Farm, relative to other ApeSwap Yield Farms.
For example: Assuming all other factors like pool size, number of participants, and token price remained the same, a Yield Farm with a 2x multiplier would pay more in BANANA rewards than one with a 1x multiplier.
NOTE: LP tokens that are staked in Yield Farms still earn their portion of the applicable trading fees, even while they are also earning BANANA in the Yield Farm. This allows users to earn both trading fee rewards (paid in the form additional LP tokens) and BANANA (paid as Yield Farm rewards) on their LP tokens.
To contribute to the longevity of the ApeSwap ecosystem and earn even more rewards, users can stake the BANANA earned from Yield Farms into the BANANA-BANANA Staking Pool to earn even more BANANA.
Yield Farm APRs are determined by three primary factors: the price of the input LP token, the price of the reward token (i.e., BANANA), and the amount of input LP tokens in the pool. Let's look at how changes to these three factors affect the APR of a Yield Farm.
- If the price of the input LP token increases, the APR will decrease, because each input LP token is worth relatively fewer reward tokens.
- If the price of the input token decreases, the APR will increase, because each input LP token is worth relatively more reward tokens.
- If the price of the reward token (BANANA) increases, the APR will increase, because the total value of the reward tokens received for the same number of input LP tokens has increased.
- If the price of the reward token (BANANA) decreases, the APR will decrease, because the total value of the reward tokens received for the same number of input LP tokens has decreased.
- If the number of input LP tokens staked in a Yield Farm increases, the APR will decrease, because the same amount of reward tokens are distributed against more input LP tokens.
- If the number of input LP tokens staked in a Yield Farm decreases, the APR will increase, because the same amount of reward tokens are distributed against fewer input LP tokens.