DeFi Yield Farming: Risks, Rewards, and How It Works

Yield farming remains one of the most popular ways to earn passive income in crypto. But the risks are real and often underplayed.

How Yield Farming Works

You deposit crypto into a liquidity pool on a decentralized exchange or lending protocol. In return, you earn trading fees, interest, and often additional token rewards. The APY can range from 2% to over 100%.

The Risks

Impermanent loss, smart contract bugs, rug pulls, and gas fees can all erode or eliminate your returns. High APY usually means high risk. If it sounds too good to be true, it probably is.

Smart Approach

Stick to audited protocols with established track records. Diversify across pools. Never invest more than you can afford to lose. Use our Price Converter to calculate your position sizes accurately.