Yield Farming

Yield farming involves earning interest by investing crypto in decentralized finance markets.

Yield farming is a strategy used in cryptocurrency to maximize returns by taking advantage of various DeFi protocols. It is a form of liquidity mining, a process by which users are rewarded for providing liquidity to decentralized finance (DeFi) protocols. By staking their assets in a liquidity pool, users can earn rewards in the form of tokens. 

The rewards are generated from the trading fees collected by the DeFi protocol. Yield farming is a popular method of earning passive income in the cryptocurrency space due to its relatively low risk and high rewards. Additionally, it can be used to increase the value of a user’s holdings by providing additional liquidity to a protocol and receiving rewards in return.

Yield farmers calculate their estimated returns using the annual percentage yield metric because APY takes compounding into account. Investors will normally chop and change between different DeFi protocols in order to get the best deal possible.

But all of this isn’t without risks. DeFi protocols can be prone to smart contract bugs, leaving funds vulnerable. Other risks include: