👨‍🌾What is Yield Farming?

we're talking bread, not crops

What is it? Why does it matter?

A major part of the growth in decentralized finance ecosystems, exhibited by drastic increases in TVL across all chains, can be attributed to yield farming - an ROI-optimizing strategy unique to DeFi. To put it very simply, yield farming is essentially when you temporarily provide your funds to a protocol that needs them, and they reward you with some of their native token.

This process allows you to earn fixed or variable interest rates on your assets, significantly higher than what's available in your bank savings account or any traditional finance product. For protocols, yield farmers provide a much needed commodity in DeFi; liquidity, which is essential to the operation of any protocol and the provision of value to their token.

How does it work?

In simple terms, Yield Farming occurs when protocols provide an incentive for individual actors, called Liquidity Providers(LP) to stake or lock up their crypto assets in a smart contract-based liquidity pool. Incentives may be a derivative of platform fees, interest from lenders, or a governance token(elaborated upon under Liquidity Mining). Returns on assets provided are measured in APY (Annual Percentage Yield), which decreases as more investors add funds to the related liquidity pool.

What is Liquidity Mining?

Whereas most Yield Farmers used to profit from farming well-known stablecoins like USDC, DAI, and UST, today, many decentralized finance platforms operate on a smart contract platform such as Ethereum. On smart contract platforms, protocols need users to provide liquidity to DEXs(Decentralized Exchanges). Those who provide that necessary liquidity are rewarded in the protocol's native Governance Token.

If you want to learn more about some of the most popular yield farming protocols, check out the page below:

🐐pageGOAT Farming Protocols

Nice! You're learning this stuff pretty fast anon. Let's do a quick review to keep everything fresh. In short, Yield Farming is the act of providing your crypto assets, either as liquidity on a DEX or to the protocol itself, in order to earn a reward (an incentive, provided by the protocol for use of your funds) .

Risks of Yield Farming:

Yield Farming is pretty amazing, but there's a reason not everyone does it; there are a lot of implicit risks, and an extremely steep learning curve. APY reducing as more users join the protocol means that profitable yield farming relies not only on mitigating numerous risks, but acting quickly to deploy capital in the right farms - making professional capital management even more useful for anyone wanting exposure to the insane returns of yield farming, but without needing the massive expertise and knowledge required to be truly successful. To explore the risks of yield farming, check out the page below:

⚠️pageRisks

DO NOT ATTEMPT YIELD FARMING WITHOUT UNDERSTANDING THE RISKS. This is crypto, anon - there are infinite ways to lose your money.