Yield farming is a strategy in decentralized finance (DeFi) where users earn rewards by depositing their cryptocurrency into liquidity pools. These pools help decentralized platforms run smoothly, and in return, users receive tokens — often the platform’s native or governance tokens.
It works like this: you deposit crypto into a pool, get a token that represents your share (an LP token), and then stake that to earn rewards. Returns can be high, but so are the risks — including impermanent loss, price swings, and smart contract bugs. Popular platforms like Uniswap, Aave, and PancakeSwap all use yield farming to grow liquidity and reward users.
While yield farming can boost your crypto earnings, it’s important to understand how it works and what could go wrong before jumping in.
