Glossary · DeFi
Yield farming
Also: liquidity mining, farming
Yield farming is the practice of moving capital between protocols to capture the highest combined return from fees, interest and token incentives, and it originated with Compound's COMP distribution in June 2020.
Related terms
- Liquidity pool
- A liquidity pool is a smart contract holding reserves of two or more tokens that traders swap against at a price set by a formula, with the depositors earning a share of trading fees.
- Impermanent loss
- Impermanent loss is the shortfall a liquidity provider incurs relative to simply holding the two tokens, caused by the pool rebalancing toward the falling asset as relative prices move apart.
- Real yield
- Real yield is return paid out of revenue a protocol actually earns, such as trading fees, borrowing interest, staking rewards or funding payments, as distinct from return paid in newly issued governance tokens.
Guides that explain Yield farming
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