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DeFi Deep Dive - What Is Yield Farming?

Written By Ivan on Tech

Aug 11, 2020

Those looking into the DeFi field will likely come across the term "yield farming". Yield Farming is the process of putting crypto tokens to productive use in a decentralized finance (DeFi) market to earn interest. Yield Farming takes place on the Ethereum blockchain, and yes, it is a way to earn passive income on Ethereum. But “hodling” ETH tokens is not the same thing as Yield Farming. 

This kind of farming is a creative process. It is also a managed process where “farmers” typically hop from one protocol to the next to maximize returns. However, farmers can also employ “set it and forget it” strategies. 

Yield Farming became popular with the release of Compound’s COMP governance token. When word got out that farmers could reap Annual Percentage Yields (APY) over 100%, things took off. At present, there is over $4.5 billion Total Value Locked (TVL) in DeFi according to DeFi Pulse

Governance tokens like COMP offer hodlers...

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