Yield farming, is also called liquidity mining, and basically, it is a way to earn rewards on your Bitcoin, and other cryptocurrency holdings.
You are essentially depositing or staking your cryptocurrencies and getting rewards or a dividend for doing so.
Additionally the tokens earned as rewards for staking can be compounded by depositing them into to other yield farms or DeFi liquidity pools where they will earn another tier of rewards.
How Do You Earn Money From Yield Farming
Yield farming returns are calculated annually and are usually listed by APR. This estimates the return that you will likely get over the course of a year.
Notice we say likely… DeFi and Yield Farming are new and risky. This is not financial advice, so do your research before investing.
With that said, the APR promised is only an estimation. Why? First of all crypto prices are very volatile and flucuate large %’s both and up down very often. Yield farming is shopping rates, prices, and rewards across exchanges and platforms that update by the minute 24 hours a day. As you can imagine this makes it possible to make some mega profits, but it is very risky, and also competitive and fast-paced.
Keep in mind if the token or coin you are staking dips too much you may have a total loss or huge margin call, so again do your research. There is even insurance that can be bought.