Yield farming is a DeFi (Decentralised Finance) strategy where users earn passive income by lending or staking crypto assets in liquidity pools. In return, they receive rewards, often in the form of interest, additional tokens, or governance rights. Yield farming strategies vary in complexity and risk, ranging from simple lending on protocols like Aave to multi-layered staking across different blockchains. While it can offer high returns, risks include impermanent loss, smart contract vulnerabilities, and platform instability. Yield farming became popular during the DeFi boom and remains a cornerstone of decentralised investing and passive crypto income generation.
Example:
Investors allocate capital to income-generating assets seeking higher returns.
