Yield Farming
Strategy for maximizing yields by moving between DeFi protocols.
Yield farming is a DeFi strategy where users actively move funds between protocols in search of the highest yield (APY/APR).
Yield farming basics:
•Deposit tokens in a lending protocol (Aave, Compound) → earn interest
•Provide liquidity to a DEX (Uniswap, Curve) → earn trading fees
•Stake LP tokens in a farming protocol → earn additional governance tokens
•Use governance tokens for yield in another protocol... (loop)
APY vs APR:
•APR — annual interest rate without compounding
•APY — accounts for compound interest (reinvesting yields)
Risks:
•Smart contract exploit — loss of all funds
•Impermanent loss on LP positions
•Protocol rugpull
•Gas costs can outpace yields for small amounts
•Inflationary reward tokens can lose value
Recommendation: Complex yield farming strategies are for DeFi experts. Start with simple staking on Binance Earn.