What Is Yield Farming?

Deposit crypto into DeFi protocols to provide liquidity and earn yield. High APYs often hide high risks — understand the source.

Where the Yield Comes From

You supply funds to a DEX or lending protocol (e.g., a token pair for market-making, or assets to lend), earning trading fees, lending interest, plus "reward tokens" the protocol mints to attract liquidity. Note: high APYs often come from token emissions and can be diluted by inflation.

Main Risks

  1. Smart-contract risk (hacks). 2) Impermanent loss (the hidden cost of price moves while market-making). 3) Reward-token price collapse. 4) "Rug pulls." Rule of thumb: a high APY whose source you cannot explain is usually where the risk hides — only risk what you can afford to lose entirely.