Definition ∞ Yield Skimming refers to the practice of extracting a portion of the returns generated from a decentralized finance protocol’s yield-generating activities, often by a protocol operator or a specific group. This can involve diverting a percentage of staking rewards, lending interest, or trading fees before they are distributed to the primary participants. It represents a form of revenue generation for the skimming entity. This practice impacts net returns for users.
Context ∞ Yield Skimming is a contentious topic in the DeFi space, raising concerns about fairness, transparency, and the equitable distribution of protocol earnings. Debates often focus on whether such practices are clearly disclosed to users and if the skimmed amounts are justified by the services provided. Future governance models and smart contract designs aim to address these concerns by promoting greater transparency and user control over yield distribution mechanisms.
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