Yield Farming

Yield farming is the process of using decentralized finance (DeFi) to maximize returns. Users lend or borrow crypto on a DeFi platform and earn cryptocurrency in return for their services.

Yield farming is essentially what you're doing when you're participating in play to earn economies. If a user utilizes his loan for yield farming it is important to compare APYs/APRs, the amount of interest you're being charged on your loan AND the amount of interest you'd be potentially earning with your investment. Fees are another important component to take into consideration when calculating your investment strategy.

Impermanent loss occurs when the price of your tokens changes compared to when you deposited them in the pool. The larger the change is, the bigger the loss.To better understand yield farming you can use the following resource from the Finematics channel on Youtube.

Yield farms that allow you to generate yield with a stablecoin pair are generally the best way to avoid impermanent loss.

To better understand yield farming you can use the following resource from the Finematics channel on Youtube.

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