What Is ‘Yield Farming’ and How Does It Differ from Staking?
Yield farming is an active DeFi strategy where users seek to maximize returns by lending, borrowing, or providing liquidity across various protocols, often involving complex and rapidly changing strategies. Staking is a simpler, more passive process of locking tokens directly into a network's consensus mechanism for security and block rewards.
Yield farming typically carries a higher risk profile than staking.
Glossar
Staking
Yield ⎊ Staking, within cryptocurrency ecosystems, represents a mechanism for participants to earn rewards by actively participating in the operation of a blockchain network, typically by locking up their crypto assets for a defined period.
Consensus Mechanism
Validation ⎊ Consensus mechanisms, within cryptocurrency, represent the procedural logic ensuring state agreement across a distributed network, critical for preventing double-spending and maintaining data integrity; their design directly impacts network security and scalability, influencing transaction throughput and finality times, particularly relevant in decentralized finance applications.
Yield Farming
Strategy ⎊ Yield Farming describes the practice of actively moving crypto assets between various decentralized finance protocols to maximize returns, often involving complex stacking of lending, borrowing, and liquidity provision activities.