If you have been in the crypto space for some time now, then you must have stumbled on the word “yield farming” a lot. However, for crypto newbies, yield farming is a way to stake your cryptocurrency to earn rewards for the same token or some other token. Yield farming eliminates the need to just Hodl but adds more twists to make it more fascinating, “Hodl and earn”. This way, you are not swayed by the price movement since the longer you hodl, the more you earn.
How does yield farming work?
If you hold a crypto asset, in this case let’s assume the pancake swap token, $CAKE. You can put the asset to work by depositing it in a DeFi lending or trading pool. The first case scenario is you can earn interest in the form of more $CAKE. The second instance is, you can earn interest in form of other tokens. You can also provide liquidity or stake your $CAKE to earn more rewards. The last way to yield farm your asset, $CAKE in this case, is to lend your asset and earn interest on them.
Five popular yield farms on BSC
It will all be a bedtime kid story if we fail to mention that there are risks to yield farming as with every other project. The risks range from smart contract risks, liquidation, to exit scams. However, if you are down for the risk and you are ready to make your crypto asset work for you, then yield farming might just be the right way.