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Yield farming, also known as liquidity mining, is revolutionizing the DeFi space by incentivizing users to provide liquidity to protocols. This trend, which gained traction in 2020, offers lucrative returns but comes with its own set of risks. Learn how it works and the key players driving this movement.
- Yield farming incentivizes users to provide liquidity to DeFi protocols, earning rewards like tokens or fees.
- Major protocols like Compound, Synthetix, Curve, and Balancer use yield farming to distribute governance tokens and boost liquidity.
- Risks in yield farming include smart contract vulnerabilities, stablecoin instability, and liquidity shortages.
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