Beyond APY: Quantifying The True Risk In Yield Farms
Yield farming. It sounds futuristic, maybe even a little intimidating. But beneath the jargon lies a powerful mechanism for earning passive income with your cryptocurrency. In this comprehensive guide, we’ll demystify yield farming, break down its core components, explore its risks and rewards, and provide you with the knowledge you need to determine if it's right for you.
What is Yield Farming?
Understanding the Basics
Yield farming, at its core, is the process of lending or staking your cryptocurrency in decentralized finance (DeFi) protocols to earn rewards. Think of it as depositing money in a high-yield savings account, but instead of a traditional bank, you're using decentralized platforms. These platforms incentivize users to provide liquidity, which is crucial for the smooth functi...