How to Start Yield Farming in 20 Minutes on BSC: Tutorial

You can start yield farming crypto in just a few minutes by setting up a wallet, acquiring tokens, and staking them in a liquidity pool. 

This yield farming tutorial will walk you through how to get started using Binance’s BNB Smart Chain (BSC), which is a popular choice because of its low transaction fees and fast processing times. This makes it a better choice than Ethereum-based platforms, where gas fees can take a significant chunk out of your profits.

RugDoc’s Diagnosis: Before diving in, you need to understand how yield farming actually works. By providing liquidity to decentralized protocols, you’ll be rewarded with crypto tokens that you can cash in for Bitcoin, other altcoins, or fiat. However, you should also be aware of risks like impermanent loss, which we’ll also cover.

The steps we’ve outlined here also work with other yield farming platforms on different chains, although the interface may vary. 

For a deeper guide on how yield farming works, check out our comprehensive article on yield farming.

How to Yield Farm on Binance Smart Chain

BSC is the perfect platform to learn how to yield farm crypto. It’s highly compatible with a range of crypto assets and features relatively low costs. We’re also going to be using PancakeSwap in this example to grab some $CAKE as the asset we use for yield farming. 

While PancakeSwap is currently one of the largest automated market makers out there, you’ll be able to apply the same principles to platforms like Venus and Autofarm, or yield farm on other networks like Ethereum or Polygon. 

The general process is the same across most platforms: connect your wallet, add some liquidity in the form of a crypto token, and stake it. 

So, let’s go through the basics and once you’ve finished our yield farming tutorial you’ll be able to do crypto farming on most platforms.

 Step 1 – Set Up Your Wallet and Acquire BNB

If you’re doing basically anything with crypto, you need a crypto wallet. MetaMask is the most widely used option as it supports a range of browsers and mobile devices, so we’ll be using it for the rest of the tutorial. You can download it from the official Metamask site here.

In this example, we’ll be using the Firefox browser extension. Download and add the add-on to your browser, then enable it by clicking on the icon in the top right of your browser and accept the Terms of Service. 

Once you’re in, you’ll need to set up a Metamask account.

Essentially, this is your digital wallet. MetaMask will ask you for a password for your account, so enter a memorable (but safe) one. Once you do, you’ll be presented with a twelve word seed phrase. Make sure to copy this down somewhere securely – it’s the only way to recover your wallet if you forget your password.

After you’ve recorded your seed phrase, click through the rest of the prompt. You’re now the proud owner of a new MetaMask wallet, so it’s time to connect it to the BNB Smart Chain. Your MetaMask wallet should actually be connected to BSC by default, but if it’s not or you need to re-add it, here’s the process:

Connect MetaMask to BNB Smart Chain:

1. Open MetaMask and click the top-right options menu, then go to ‘Network”
2. Type ‘BNB” into the search bar
3. Click Add next to ‘BNB Chain”
4. Switch to ‘BNB Chain” from the dropdown box below ‘Tokens”

MetaMask auto-populates the BSC settings for you, so most of the work is already done. Your wallet address should be the same as your Ethereum address. However, bear in mind you can’t directly transfer assets from BSC to Ethereum without using a bridge.

Fund Your Wallet with BNB:

You’ll need some $BNB to pay for transaction fees when you trade on BSC. You can purchase $BNB on Binance, then withdraw it to your MetaMask address using the Binance interface. 

  Step 2 – Prepare Tokens for Farming

Liquidity pools usually ask you to provide two assets in equal USD value. For example, if you want to stake $50 of $BNB in a pool, you’ll also be asked to provide $50 of $CAKE. Before farming, you’ll need to acquire both tokens. Thankfully, PancakeSwap makes this easy.

Just navigate to PancakeSwap and connect your wallet by clicking the ‘Connect Wallet’ button. Select MetaMask, approve the connection request, and make sure your wallet is set to BSC.

Swap BNB for your chosen farming token:

1. Click Trade then Swap in the navigation menu at the top of the screen
2. Select BNB as the input token and your target token (e.g., $CAKE) as the output
3. Enter the amount. Remember to keep some BNB for gas fees!
4. Review the exchange rate and click Swap
5. Confirm the transaction in MetaMask

There are tons of different farming pairs on PancakeSwap that all offer different returns on investment. Higher-reward pairs often carry greater risk because of underlying volatility in the price of the assets in the liquidity pool, so you’ll want to start with established tokens before trying out newer crypto. 

For more,check out our guide on how to find the best APR in yield farming.

 Step 3 – Provide Liquidity and Receive LP Tokens

Now you’ve got your crypto assets of choice, it’s time to use them to provide liquidity. Adding liquidity creates the foundation for earning farming rewards. Basically, when you supply crypto to a liquidity pool, you receive Liquidity Provider (LP) tokens which represent your share of that pool – more on that in the next step.

Add liquidity to a token pair:

1. On PancakeSwap, navigate to Earn > Farm / Liquidity
2. Search for your token pair on the BSC and click it, then hit ‘Add Liquidity”
3. Enter the amount for one token. The interface automatically calculates the equivalent amount for the other
4. Click Supply and review the pool details
5. Confirm the transaction in MetaMask

Once the transaction confirms, you’ll be awarded a set of LP tokens that appear in your wallet. They show your ownership stake in the liquidity pool and will be needed for yield farming.

NOTE: While your tokens sit in the liquidity pool, you’re exposed to a concept called ‘impermanent loss’. Essentially, the more that the price ratio between the assets you’ve provided diverges, the more value you lose compared to just holding the assets separately. 

However, this loss only realises once you withdraw the liquidity – if you wait for the ratio to stabilize, the loss disappears. Picking the right time to withdraw your assets is essential to retaining value. 

 Step 4 – Stake Your LP Tokens in a Farm

You’re almost done! Now it’s time to take your LP tokens and stake them in a farm to begin generating yield farming rewards. Navigate to Earn > Farms on PancakeSwap to see available farming opportunities.

1. Find your liquidity pair using the search bar or by scrolling through available farms
2. Click on the farm to expand details, including APR and multiplier
3. Click Stake and enter the amount of LP tokens to stake (typically 100% to maximize yields)
4. Confirm the staking transaction in MetaMask

Now that you’ve staked your tokens, your position is active and you’ll begin accumulating rewards. The farming APR is an estimate based on current conditions. It will fluctuate based on the total liquidity staked and token prices.

You can harvest your rewards at any time by clicking ‘Harvest’ from the ‘My Positions’ page, but you’ll incur a small fee through transaction costs when you withdraw. 

It’s not entirely hands off – you’ll need to manage the risk of letting your tokens sit for longer against the cost of frequent harvesting. Generally, holding a bigger position mitigates transaction fees because they take a smaller chunk of your overall rewards.

 Step 5 – Managing Your Yield Farming

Keeping an eye on how your assets are performing is key to making money out of yield farming. When harvesting, you can either sell your token rewards, hold them to speculate on rising token prices, or compound your rewards by adding them back into the liquidity pool for additional staking rewards.

Compounding accelerates your returns, but make sure the gas fees aren’t chewing up your profits. You’ll also need to be aware of timelocks – check out our guide on timelocks for yield farming before you enter into a timelocked staking contract.

How to Start Yield Farming – The TL:DR Version

DeFi yield farming on BSC doesn’t take very long at all once you understand the workflow. It’s pretty simple: set up your MetaMask wallet, fund it with $BNB through Binance, swap your $BNB for your target tokens ($CAKE in our case), add liquidity to the pool, and stake your LP tokens for rewards. 

Remember that higher APRs typically means higher risk. If you’re concerned about impermanent loss, start off with stablecoin pairs. There’s almost no risk of the price ratio changing, but you won’t receive particularly high rewards for adding to the liquidity pool. 

Start with small amounts, and never invest more than you’re willing to risk.

FAQs

1. Is yield farming still profitable?

Yield farming can be profitable, but it all depends on the market conditions and the pools you choose. PancakeSwap offers sustainable yields between 5-40% depending on the pools you choose, with higher returns carrying proportionally higher risks from impermanent loss or token depreciation.

2. How to start yield farming crypto?

Start by setting up a non-custodial wallet like MetaMask, then connect it to a blockchain like BSC. Purchase the native token (in this case, $BNB) for gas fees, swap some of it for your chosen farming token, add them to a liquidity pool, then stake the resulting LP tokens in a farm. When you want to receive your rewards, just harvest them through the staking platform’s interface.

3. How much can I earn from yield farming on BSC?

Earnings depend on the capital you invest and the general market conditions for the pools you’re choosing. For example, a $1000 total position at 20% APY will generate $200 annually before accounting for impermanent loss or price changes in the underlying tokens. Generally, wherever the APY is higher, there’s a greater risk of volatility from the underlying tokens – they can potentially lose value faster than your rewards accumulate.

Click to expand the list of references

1. https://rugdoc.io/wiki/docs/yield-farming/
2. https://rugdoc.io/wiki/docs/how-to-find-the-best-apr-in-yield-farming/
3. https://metamask.io/
4. https://www.kraken.com/learn/what-is-impermanent-loss
5. https://rugdoc.io/wiki/docs/everything-you-wanted-to-know-about-timelocks-for-yield-farming/