What is Yield Farming?
Crypto Glossary Definition
Yield farming is a process of earning interest and generating a return on capital within the DeFi & Ethereum ecosystem. This refers to a combination of numerous techniques involving incentive schemes, liquidity pools and leverages borrowing. Popular platforms where yield farming takes place include Compound, Aave, 0x, Balancer, Uniswap and Synthetix.
Why Yield Farming Matters
Yield farming means moving funds between DeFi protocols to chase the highest available interest or reward rate, often reinvesting rewards to compound them. Advertised yields can be extremely high specifically because the underlying risk — smart-contract bugs, token price collapse, or impermanent loss — is also high.
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