What is a farming pool and how does it work?

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

What do you need to know?

• How does a Farming Pool work?
• The security of Farming Pools within Bit2Me Earn

How does a Farming Pool work?

A classic example of how a Farming Pool operates would be the following: the exchange or project (centralized or decentralized) would distribute a reward percentage by dividing the amount of its native token that the user holds by the total amount of tokens locked at that time in the farming pool.  Another common example would be to apply a fixed % APY, without taking into account the budget or fixed amount to be distributed, which makes it a typology with more risks by not controlling the dilution of the token's value or the inflation that would be applied to it.

The procedure consists of assigning a specific number of tokens to be distributed proportionally among each transfer and lock performed. Based on this ratio of tokens to be distributed and the number of tokens corresponding to each unit of tokens transferred and locked, the equivalent annual reward (APR) can be inferred, and by knowing the distribution frequency of the rewards, also its annual distribution percentage (APY). 

This calculation will be an estimate of what each user would receive if the conditions influencing the token distribution, such as the amount of tokens to be distributed and the total number of tokens transferred and locked, do not vary. Furthermore, this calculation will be updated every minute.

Additionally, a modifier can also be applied to the calculated APY according to the user's LEVEL, which may increase the percentage applicable to their transfer and lock. The rewards that users storing the platform's own tokens will receive will be based on the calculation mentioned above. This calculation will also be performed 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 insured cold wallets thanks to the agreement with Ledger Enterprise. With this technology, a combination of hardware, firmware, and software is used, providing 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 positions themselves between the target and the source, going completely unnoticed, to intercept what happens between them. 

Furthermore, Bit2Me has recently obtained the ISO 27001 certification, key to protecting an organization's most important assets, its customer and employee information, corporate image, and all types of private information.