What Is Yield Farming?

July 7, 2020, by Maayan
Yield farming is the latest trend in the cryptocurrency world. Here’s why it matters.

Yield farming is a type of interest-bearing investment that involves lending your crypto to a service that can put those funds to use.

There are a few different services that allow this, most of which rely on Ethereum and related cryptocurrencies. Five notable services are:

  • Compound, an “autonomous interest rate protocol”
  • Aave, a permissionless lending platform
  • InstaDapp, a DeFi management app
  • Balancer, a portfolio management tool
  • bZx, a margin trading platform

Yield farming has attracted plenty of attention in the news cycle because it promises high interest returns (above 100%). It also gives investors complete control over their money without the need to rely on banks.

However, yield farming platforms are high-risk due to the fact that they are quite new and not always stable or secure. Recently, hackers have stolen funds from platforms such as dForce, bZx, and Balancer.

This means that yield farming carries different risks than Bitcoin carries.

Even though Bitcoin has fairly unpredictable market prices, Bitcoin is secure and stable, and it has stood the test of time for over ten years—making it a more straightforward investment for new buyers.

Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.