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What is a farming pool and how does it work?

Updated on Wed, 7 Feb, 2024 at 8:29 PM


What is Farming Pool?

A Farming Pool is the functionality by which an exchange makes available to its users a certain amount of tokens to be distributed equally as a reward among all those who participate in it.

How does a Farming Pool work?

A classic example of Farming Pool operation is the following: the exchange or project (centralized or decentralized) would distribute a percentage of reward by dividing the amount of the token held by the user by the total amount of tokens blocked at that moment in the farming pool.  Another common example would be to apply a fixed % APY, regardless of the budget or fixed amount to be distributed, which makes it a typology with more risks as not controlled the dissolution of the value of the token or the inflation that would be applied.

The procedure consists of allocating a certain number of tokens to be distributed between each transfer and blocking carried out in a proportional manner. Based on this ratio of tokens to be distributed and the number of tokens corresponding to each unit of transferred and locked tokens, the equivalent annual reward (APR) can be inferred and, knowing the frequency of reward distribution, also its annual distribution percentage (APY).

This calculation will be an estimate of what each user would receive if the conditions influencing token distribution remain unchanged, such as the number of tokens to be distributed and the number of total tokens transferred and blocked. In addition, this calculation will be updated every minute.

Additionally, a modifier can also be applied to the APY calculated according to the LEVEL of the user, which may increase the percentage applicable to their transfer and blocking. The rewards received by users who store the platform's own tokens will be based on the calculation mentioned above. This calculation will also be made every minute and will be delivered on a daily basis.

The security of Farming Pools within Bit2Me Earn

In the case of Bit2Me Earn, the Farming Pool has an extra layer of security, as they are always stored in secured cold wallets thanks to the agreement with Ledger Enterprise. This technology employs a combination of hardware, firmware and software that adds a new security layer to Bit2Me's technology, while eliminating any possibility of a man-in-the-middle attack, a type of threat where the attacker stands between the target and the source, going completely unnoticed, in order to intercept what happens between them;

In addition, Bit2Me has recently achieved ISO 27001 certification, which is key to protecting an organisation's most important assets, customer and employee information, corporate image and all types of private information.

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