Yield Farming Strategy

Definition ∞ A Yield Farming Strategy is a planned approach employed by digital asset holders to maximize returns on their cryptocurrency holdings by participating in various decentralized finance protocols. This involves allocating assets across different platforms and protocols to earn fees, interest, or new tokens. It is a method for generating passive income from digital capital.
Context ∞ Yield farming strategies are a prominent topic in decentralized finance news, often highlighting high-return opportunities alongside significant risks such as impermanent loss, smart contract vulnerabilities, and fluctuating token prices. These strategies are complex and demand a deep understanding of various protocols and market conditions. The pursuit of optimal yield drives significant capital movement within the digital asset ecosystem.