Yield farming is an innovative application of decentralized finance that is becoming increasingly popular. It involves staking crypto assets to generate high returns in the form of additional cryptocurrency. It is a volatile, risky practice, but one that has generated extremely high annual percentage yields. A number of yield farming protocols exist: Aave, Compound, Curve Finance, Uniswap and its offshoot SushiSwap, Instadapp and PancakeSwap. These protocols generally reward with governance tokens which can be traded on exchanges. You cannot yield farm directly for BitCoin. CoinMarketCap has DeFi Yield Farming Rankings that can be used to evaluate the various platforms. The risk of yield farming isn’t just due to volatility. The practice has been subject to hacking and “rug pulling.”
Key Takeaways:
- Yield farming is when you stake or lend crypto assets in order to get a higher return or reward in the future.
- Yield farming will incentivize liquidity providers to lock up their assets in a smart, contract based pool.
- The incentives that come from yield farming can be a percentage of a transaction fee or interest from a lender.
“At first, most yield farmers staked well-known stablecoins USDT, DAI and USDC.”
Read more: https://coinmarketcap.com/alexandria/article/what-is-yield-farming
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