An Introduction to Yield Farming Tokenomics by Polypup

In this article, the developer of Polypup talks about yield farming tokenomics! What goes into tokenomics? And what does liquidity, emission rate, and utility do? Find out here!

Tokenomics in yield farming is a tricky subject. From the outset a developer needs to decide what kind of yield farmer they’re trying to cater to. Farmers vary in their strategies:

  1. You have the ‘short term apes’ – people looking for insanely high APRs and then dip in and out of those farms while scooping up nice returns.
  2. You have the ‘pre-farming hypers’ who buy in during token launch and hype up to increase people buying in and then dump the token just prior to the start of farming.
  3. You have the conservative yield farmer that buys your token at a decent price compounding multiple times per day. These are the farmers developers ideally want and look for. 

Now that you’ve decided which kind of farmer you’re catering to, it’s now time to decide how best to suit their needs.


Let’s first talk about liquidity. At token launch, farms need to provide initial liquidity through their choice of Decentralized Exchange. 

Providing a smaller amount of tokens during the liquidity event will result in a massive spike during token launch and a massive crash when farming starts. While this will raise your prices in pre-sale and cater to your pre-farming hypers who are focused on the highest token price possible to trade, this is a bad user experience for your conservative yield farmers. 

A better user experience comes from providing enough tokens to prevent this kind of crash at the beginning of farming. However, it is important to understand that some reduction in price is to be expected as the pre-farming hypers are looking to dump your token to turn quick profits.

Emission Rate

Your next consideration is emission rate, which is defined by how many of your native tokens are minted every block. An emission rate that is too high will provide high APRs but will result in over-inflation of your token supply, thereby aiding the price crash of your token.

Whereas, an emission rate that is too low may provide a more realistic APR but may result in a boring farming experience for the users.

Many tokens are established in such a way that new coins are created on a regular basis infinitely, these are called infinitely minting tokens. If a token has a limit on how many coins will ever be created, it will have a maximum supply which will limit the supply end of the supply and demand problem. 

One of the most important deliberations you will face as a developer is the balance between longevity of your farm and heightened APYs/APRs to attract new investors.

Additionally, when building your farm you should examine whether you need time to execute certain milestones to maintain interest in your token and build in utility. These factors are especially important if you balance your farm more on the side of longevity vs high APR and emissions.


Lastly, you’ll need to analyze the utility of your token. What differentiates your tokens from other farms, what utility will you bring via buybacks or other forms of staking opportunities? These mechanisms help to sustain price by allowing users to continue earning high yields for longer periods of time. Remember a user’s ROI isn’t only attentive to price; Return on investment (ROI) in yield farming is price quantity.

Here are some examples of farms that provided unique utility in order to sustain price:

  • Polycat – burns through vaults, lockups through staking
  • Polyzap – lockups on harvested rewards
  • Polypup – Dividend rewards: providing users many options to stake the native token to earn top tier tokens such as BTC, ETH, USDC, etc.


🟢 For owners who have made impactful changes and would like an update to their farm review:

1️⃣ Use #update at @RugDocChat with your description and proof of changes and it will be forwarded to our scanners.

2️⃣ This does not guarantee a change in your review.

3️⃣ Owners who have difficulty solving the issues can consider our Consultation Package – please contact @BaymaxCrypto on Telegram to discuss.

Our mission here at RugDoc is to screen for hard rug code that results in 100% theft of ALL underlying funds for ALL participants.

This is the ONE part of the due diligence process that most people cannot simply do on their own as it costs thousands of dollars to hire a senior solidity developer to look over a farm for safety.

A project coin with terrible code can go up in price, and a project with good code and a good team can also go down in price.

Do NOT use our ratings to refer to your likelihood in making money if you invest in the project. They are ONLY in reference to code safety.

Everything else beyond code safety is YOUR responsibility to go do research on. We just make sure the casino you’re betting in won’t rob you before you even get to place a bet.

Our reviews for projects are organized into a few colors.

🟢 Least Risk
These projects are the least likely to hard or soft rug. Usually reserved for cornerstone projects of an ecosystem where it makes no financial sense for them to rug in any manner as they make more money just being legit.

🔵 Low Risk
These projects are usually established projects in an ecosystem that have a track record of success or have KYC’d to us or other authoritative sources in the real world. As a result, it is extremely unlikely for them to soft rug or hard rug their projects. The projects can still fail and the token price can go down, but usually more as a result of natural market forces.

⚪️ Some Risk
This is the default rating for projects with unknown teams but have code that is unlikely to have hard rug risk. Since the team is unknown and doesn’t have a track record of success, it’s entirely possible that they may try to soft rug by dumping tokens, abandoning the project, etc. Even a last minute contract swap to a malicious contract is possible. The only thing that is unlikely is a complete hard rug as long as you are 100% sure you deposit into the contract we review.

🟠 Medium Risk
Similar to Some Risk, but the underlying code itself is custom enough or complex enough that it warrants an elevated risk rating that needs deeper research. Make sure you read every point presented to make sure you’re comfortable with that before entering. Still unlikely to hard rug, but more chances of custom code behaving incorrectly and causing other issues.

🔴 High Risk
Project contains code or practices that are HIGHLY LIKELY to lead to catastrophic losses as they are right now. Make sure you read the description carefully as we will always warn what these issues are. If you see the words Hard Rug anywhere in the review, STAY FAR AWAY!

⚫️ Not Eligible
We reserve the right to not review exceedingly complex projects that would require tens of thousands of dollars of senior security analyst man hours. Typically these are projects that deal with leverage, lending, options, derivatives, and anything that is overly complex and which requires tons of peer reviews and audits from top audit companies.