Definition
A DeFi strategy where users provide liquidity or stake assets across multiple protocols to maximize returns. Yield farmers move assets between protocols to capture the highest available yields.
Why It Matters
Yield farming represents one of the primary ways to earn passive income in DeFi, but also carries significant risks including impermanent loss and smart contract vulnerabilities.
Example
A DeFi user provides liquidity to a Curve Finance pool and stakes the resulting LP tokens in Convex Finance to earn multiple layers of rewards.
Related Terms
DeFi
Liquidity Pool
Staking