Yield Farming is now one of the hottest topics in decentralized finance and there is a high chance you may have already heard something about insane returns that some of the yield farmers are making. So what is yield farming? How did it all start? What are some of the examples of yield farming? And also what are the risks involved? We'll be going through all of this in this video.
But before we start, if you're new to DeFi you may want to pause this video and watch my introduction to decentralized finance video first. https://youtu.be/k9HYC0EJU6E
Yield Farming, in essence, is a way of trying to maximise a rate of return on capital by leveraging different DeFi protocols.
Yield farmers try to chase the highest yield by switching between multiple different strategies. The most profitable strategies usually involve at least a few DeFi protocols like Compound, Curve, Synthetix, Uniswap or Balancer. If the strategy doesn't work anymore or if there is a better strategy available the yield farmers move their funds around. They may, for example, move the funds between different protocols or they may swap some of their coins to other ones that are currently generating more yield. In our yield farming world, this procedure is sometimes called crop rotation.
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