Yield Farming
A DeFi strategy where users move assets between different protocols to maximize returns by earning trading fees, rewards, and governance tokens.
Why It Matters
Yield farming allows users to earn returns by lending or staking their cryptocurrencies, providing a way to maximize returns on assets. It matters because it promotes deeper engagement in the decentralized finance (DeFi) space.
Example
For instance, if you provide liquidity to a decentralized exchange, you may earn fees and incentives in the form of additional tokens, enhancing your yield from the initial investment.
Beginner Context
For newcomers, yield farming represents a more advanced aspect of cryptocurrency investing, showcasing how to utilize assets for potential returns beyond simple holding.
Mike Starr
Founder, CryptoWizardTools · M.S. Organizational Management
Last reviewed: August 2026
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Related Terms
Yield
The return earned on a cryptocurrency investment, typically expressed as a percentage. Yield can come from staking, lending, or providing liquidity.
APY
Annual Percentage Yield. The effective annual return on an investment, accounting for the effect of compounding interest.
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.
DeFi
Decentralized Finance. Financial services and products built on blockchain technology that operate without traditional intermediaries like banks or brokerages.
Impermanent Loss
The temporary loss experienced by liquidity providers when the price ratio of deposited assets changes compared to when they were deposited.