‘Yield Farming’ is a strategy in decentralized finance (DeFi) where users lend or stake their cryptocurrency assets in various protocols to generate rewards or interest. These rewards are often paid in the form of additional cryptocurrency, effectively increasing the initial investment. It is a method for maximizing returns on digital assets.
Context
‘Yield Farming’ is a dynamic and often volatile sector within DeFi, frequently featured in news regarding high annual percentage yields (APYs) and associated risks. Discussions center on the sustainability of high yields, the security of underlying protocols, and the potential for impermanent loss. Critical future developments to monitor include regulatory responses to DeFi lending practices and the evolution of risk management strategies for yield farmers.
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