What is Yield Farming? Beginner’s Guide – Decrypt

In brief

  • Yield farming lets you lock up funds, providing rewards in the process.
  • It involves lending out cryptos via DeFi protocols in order to earn fixed or variable interest.
  • The rewards can be far greater than traditional investments, but higher rewards bring higher risks, especially in such a volatile market.

It’s impossible to sail the crypto seas without constantly navigating through new trends and buzzwords. One of the latest ones you may have come across recently is yield farming—a reward scheme that’s taken the decentralized finance (DeFi) world by storm during 2020.

Arguably one of the main reasons people are drawn to the DeFi world, yield farming has seen inexperienced investors get burned and tech-savvy capitalists making their fortunes.

As with most things related to blockchain and cryptocurrency, the concept of yield farming can be intimidating at first, but fear not—we’re going to cover everything you need to know below, kicking off with what it is, how it works, and why you might be interested to explore it further.

So what is yield farming and what does it mean for the world of crypto? Without further ado, let’s dive in.

What is yield farming?

At its core, yield farming is a process that allows cryptocurrency holders to lock up their holdings, which in turn provides them with rewards. More specifically, it’s a process that lets you earn either fixed or variable interest by investing crypto in