Explain the Concept of "Yield Farming" and Its Inherent Risks, Including IL ▴ Learn

Explain the Concept of “Yield Farming” and Its Inherent Risks, Including IL.

Yield farming is the practice of staking or lending crypto assets to generate high returns, typically in the form of governance tokens and trading fees. The process often involves providing liquidity to an AMM, exposing the farmer to impermanent loss (IL).

Other risks include smart contract bugs, liquidation risk from leveraged positions, and the risk of the farm's native token price collapsing (rug pull or token inflation).

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