Yield Farming

Yield farming, sometimes called liquidity mining, is the practice of moving crypto assets between DeFi protocols to earn returns. A farmer might supply tokens to a lending market, deposit them into a liquidity pool, or stake LP tokens in a rewards contract that pays out an extra governance token. Returns come from interest, trading fees and incentive emissions, and are usually quoted as APR or APY. Those rates move constantly because they depend on demand, token prices and how many people share the same reward budget. Stacking protocols also stacks risk: a smart-contract bug, an oracle failure or a collapse in the reward token price can erase both the yield and the original deposit.