Yield Farming
Earning rewards by providing liquidity or staking tokens in DeFi protocols.
Explained Simply
Yield farming involves depositing your crypto into DeFi protocols to earn returns. You might provide liquidity to a decentralized exchange, lend on a money market, or stake in a protocol's governance system. Returns come from trading fees, token rewards, or interest. While yield farming can offer higher returns than traditional staking, it also carries risks like impermanent loss, smart contract exploits, and token price drops.
Example
Depositing USDC and ETH into a Uniswap liquidity pool earns you a share of trading fees plus any bonus reward tokens.
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