Glossary
Yield Farming
The practice of moving capital between DeFi protocols to maximize the combined yield from interest, trading fees, and token incentives.
Yield farming is what users do when they treat DeFi as a yield optimization problem. A farmer might deposit a stablecoin into a lending market, post the resulting receipt token as collateral elsewhere, borrow against it, supply both sides of a liquidity pool, and stake the LP tokens for an emissions reward — all in pursuit of the best risk-adjusted APR.
The trade-off is exposure: each layer adds smart-contract risk, oracle risk, and liquidation risk. The headline APRs in farming campaigns are usually time-limited token emissions that decay sharply as more capital arrives.