What is Yield Farming?
Let's find out Yield Farming meaning, definition in crypto, what is Yield Farming, and all other detailed facts.
Yield Farming is an investment strategy with the goal of generating high returns by investing in cryptocurrencies through decentralized finance (DeFi) markets. It became especially popular in 2020.
This investment strategy generally involves staking, also referred to as holding or lending a specific cryptocurrency. There are a few decentralized finance platforms that issue rewards for their users in the form of governance tokens.
The annual percentage yield (APY) is used to calculate the return on an investment (ROI). It’s a good option since it includes the effect of compounding interest.
Most yield farmers practice changing the DeFi protocol multiple times. They do this in order to receive maximum returns.
Just like any investment strategy, yield farming is not without its risks. The main issue remains within smart contracts, as they’re susceptible to various bugs. This can, in turn, leave the coins and tokens wide open to attacks from hackers.