Dive Into DeFi

Dive Into DeFi: Buy, Hold, Earn, Compound. Welcome to DeFi (Part 2)

Part one of this two-part mini-series was about setting up MetaMask and bringing some BNB into the Binance Smart Chain ecosystem. This article will focus on setting up your first yield-earning liquidity positions that you can earn with and compound over time.

Setting Up Liquidity Pairs

If you are new to Binance Smart Chain (BSC) and DeFi, I would really recommend starting with a community trusted automated market maker exchange like PancakeSwap.Finance. There are other options, but you may not be sure which ones carry greater risk, so this is a great place to start. 

Now that you have BNB in your wallet, you need to use the exchange on PancakeSwap to allocate funds to the tokens that you want to hold within liquidity pairs. Some great pairs to start with would be:




Some key concepts you need to understand before building liquidity pairs are:

  1. When providing a pair to a liquidity pool to earn, you must provide equal dollar amounts of each token in the pair (Example: If you want to provide $200 of liquidity to the BTCB – BNB pair, you need to own $100 of both BTCB and BNB). 
  2. BNB is used to cover fees on BSC, so always plan to hold a decent amount of BNB in your wallet. 
  3. Every transaction on BSC has a fee. 

After understanding these concepts, let’s walk through a scenario in which you funded a wallet with 10 BNB and wish to create 3 liquidity positions earning interest. In this example, we will assign 3 BNB to each liquidity pair, leaving 1 BNB in your wallet to cover futures fees. 

  1. Go to PancakeSwap.finance and navigate to the exchange via the menu on the left. 
  2. On the Swap screen, make sure that you have BNB and BTCB selected from the dropdown menus. BNB should be on the top. 
  3. Convert 1.5 BNB to BTCB by typing 1.5 in the BNB position. This will auto-populate the equivalent amount of BTCB you will receive. 
  4. Click Swap, and approve the transaction. 
  5. Repeat steps 2-4 for ETH and BUSD. 

You should now have the required tokens to create the liquidity pairs within your wallet. From the exchange screen, select liquidity, and complete the following steps for all 3 pairs. 

  1. Select the pair you wish to provide liquidity to in the dropdown menus (BNB and BTCB). 
  2. Click “max” next to BTCB. You should see your liquidity amounts auto-populate on the screen. 
  3. Approve any tokens that you have not yet approved. 
  4. Click “Add Liquidity”
  5. Complete steps 1-4 for both Eth and BUSD

Boost Your Earnings

With your liquidity now provided to PancakeSwap, you are earning trading fees with every single transaction. These fees are automatically added to your liquidity position. Your next step is to boost your earnings using the farms available on the site. You can do this in two ways:

  1. Earn Cake on PancakeSwap.com
  2. Auto Compound your liquidity on a yield optimizer like Beefy.Finance, Jetfuel.Finance, or Autofarm.Network

To earn Cake on Pancakeswap.com, navigate to the Farm page via the menu on the left side of the screen. Once you are on the Farm page, find the pairs that match your liquidity positions. After you locate the BTCB – BNB farm, you first need to approve the contract. After clicking on approve, you will need to complete a transaction to gain access. Finally, click the supply button, and follow the prompt on the pop up. 

If you would rather have a set it and forget system, yield optimizers may be the way to go. I recommend looking at the three optimizers provided above and compare yields. Also, look into how each of them operates and make a decision that best works with your goals and strategies. 

Once you settle on the yield optimizer of your choice, you will simply locate your liquidity pools, approve any necessary contracts, and deposit your liquidity. These optimizers will compound your positions for you automatically. 


The point of this article is to help set up some liquidity positions with what I believe to be lower-risk positions. Defi offers a lot of liquidity options, and many carry extremely high risk and should really only be explored once an investor has the basics figured out. If you are interested in higher yield positions, I recommend taking some time to understand how the specific tokens operate, what gives them value, and why you would want to hold exposure in your portfolio. 

I believe one of the best ways to start with Defi is through low-risk positions while you familiarize yourself with the basics of different platforms whether they are yield farms, automated market makers, or yield optimizers. Always remember to be careful when using a platform for the first time and look for additional resources either on BSC.News, telegram, medium, or discord. Most projects have active communities with people eager to help. 

Good luck, and happy yield farming. 

Related News