What is Yield Farming?. Yield farming is earning rewards by providing liquidity or participating in incentive programs on DeFi protocols.
How it works
Liquidity providers deposit tokens into pools and receive fees or incentive tokens. Strategies rebalance to manage risk and returns.
Why it matters
Farming can compound gains but introduces smart‑contract, market, and incentive risks.
Common pitfalls
- Ignoring impermanent loss
- Staking in unaudited contracts
- Chasing APY without liquidity depth
Quick example
You deposit two tokens in a pool, receive LP tokens, and stake them to earn additional rewards while monitoring price divergence.
See also
- Impermanent Loss
- APY
- DEX
TL;DR: What is Yield Farming? defined in plain English with practical next steps.
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