An example of yield farming would be to lend out your ETH on Aave for a return beyond the ETH price appreciation.

What is ethereum yield farming. In the simplest terms yield farming refers to the DeFi activity in which you make more crypto with your digital assets. While this sounds great its not as easy as it may first seem. While this might change in future.

Yield farming alternatively known as liquidity mining is a method of earning cryptocurrencies by temporarily lending crypto. The yield comes from the distribution of governance tokens. The hot new term in crypto is yield farming a shorthand for clever strategies where putting crypto temporarily at the disposal of some startups application earns its owner more.

Where does the yield come from. Yield farming is the process of staking your cryptocurrencies to earn more of them as passive income. Ethereum has been the poster child of DeFi or decentralized finance where more than 60-billion in total liquidity is locked at the time of writing in the many services and platforms that are built and powered by its blockchain.

Lets start with a simple statistic. With yield farming the concept is the same. What is Yield Farming.

Cryptocurrency that would otherwise be sitting in an exchange or in a wallet is lent out via DeFi protocols or locked into smart contracts in Ethereum terms in order to get a return. Yield farming is a way to earn interest on your crypto. Yield farming is built upon Ethereum.

Ultimately the more complicated a protocol is the more gas is required to execute a transaction. In 2020 the DeFi space is so far growing at a rate of 150 in terms of total value locked TVL in dollars. This innovative yet risky and volatile application of decentralized finance DeFi has skyrocketed in popularity recently thanks to further innovations like liquidity mining.