Yield Farming
Moving capital between protocols to maximize on-chain returns from incentives, fees, and interest.
Yield farming often involves providing liquidity, staking LP tokens, or looping collateral to earn token incentives. Risks include impermanent loss, smart contract bugs, and incentive dilution.
"They provided liquidity to a DEX and staked the LP token to farm additional rewards, monitoring APR as incentives decayed."
Related Terms
DeFi
→DeFi, or Decentralized Finance, is a revolutionary sector in the blockchain industry that uses smart contracts to create permissionless financial services that are open to everyone and operate without intermediaries.
Decentralized Exchange
→A decentralized exchange (DEX) is a platform that allows users to trade digital assets directly with each other, without the need for an intermediary, such as a brokerage or bank.
Liquidity
→The ease with which a crypto asset can be bought or sold without affecting the market price.
All terms and definitions may update as the Cryptionary improves.
