Farming
Short for yield farming. The practice of deploying crypto assets into DeFi protocols — such as liquidity pools or lending markets — to earn rewards, interest, or governance tokens. Returns can be high but risks include smart contract bugs and impermanent loss.
Why It Matters
Farming, or yield farming, involves lending cryptocurrency to earn interest or rewards. It’s essential for investors looking to generate passive income and maximize returns on their holdings in decentralized finance (DeFi).
Example
For instance, if you lend your Ethereum on a decentralized platform and receive interest in tokens over time, that’s yield farming. It allows your assets to grow without actively trading.
Beginner Context
If you're new to crypto, understanding farming introduces you to the concept of earning passive income through DeFi. This can enhance your investment strategy by working your assets while you hold them.
Mike Starr
Founder, CryptoWizardTools · M.S. Organizational Management
Last reviewed: August 2026
Related Terms
Liquidity Pool
A collection of funds locked in a smart contract that provides liquidity for decentralized exchanges. Users who contribute to pools earn trading fees as rewards.
Buy the Dip
A strategy (and popular crypto phrase) of purchasing an asset after its price has dropped, on the belief that the decline is temporary and the price will recover. Buying the dip works in uptrends but can be costly in sustained bear markets.
Web3
The vision of a decentralized internet built on blockchain technology, giving users ownership over their data, identity, and digital assets.
ATL
All-Time Low. The lowest price ever reached by a cryptocurrency or asset.
Leverage
Using borrowed capital to increase the potential return of an investment. In crypto trading, leverage allows traders to control larger positions with smaller amounts of capital.