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How Does ‘Yield Farming’ Relate to the Concept of a Liquidity Pool?

LPs stake their LP tokens in another protocol to earn secondary rewards, maximizing returns on their provided capital.
Greeks.Live06.11.25

How Does ‘Yield Farming’ Relate to the Concept of a Liquidity Pool?

Yield farming is the practice of leveraging assets in a liquidity pool to earn additional rewards beyond the standard trading fees. LPs deposit their tokens into a pool, receive LP tokens, and then often stake these LP tokens in a separate protocol.

This staking earns them governance tokens or other cryptocurrencies as a secondary incentive, effectively "farming" yield on their provided liquidity.

What Is the Role of the Secondary Token’s Market Depth in the Stability of the System?
How Do Liquidity Providers (LPs) in a DEX Earn Fees?
What Happens to the Secondary Token’s Value during a “Death Spiral” Event?
How Does ‘Liquidity Mining’ Differ from Standard Yield Farming?

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