{"id":39244,"date":"2023-03-21T03:40:23","date_gmt":"2023-03-21T02:40:23","guid":{"rendered":"https:\/\/www.coinpro.ch\/glossar\/yield-farming\/"},"modified":"2025-08-08T09:24:51","modified_gmt":"2025-08-08T07:24:51","slug":"yield-farming","status":"publish","type":"encyclopedia","link":"https:\/\/www.coinpro.ch\/en\/glossary\/yield-farming\/","title":{"rendered":"Yield Farming"},"content":{"rendered":"

In recent years, yield farming has become increasingly popular. Yield farming refers to the process by which users deposit their cryptocurrencies as collateral in order to receive interest or rewards in the form of additional cryptocurrencies<\/a>. <\/span><\/p>\n

Despite the associated risks and high volatility<\/a> in the crypto market, yield farming has significantly shaped the DeFi<\/a> sector and contributed to the market capitalization from $500 million to $10 billion in 2020 <\/span>exploding<\/span><\/i><\/a>.<\/span> <\/p>\n

The purpose of yield farming is to motivate liquidity providers to deposit or lock their cryptocurrencies in a liquidity pool<\/a>.<\/span> Typical incentives include a percentage of transaction fees, interest from lenders, or a governance token<\/a>.<\/b>. These returns are typically represented as APY (annual percentage yield).<\/span><\/p>\n

How Has Yield Farming Become Popular?<\/h2>\n

Yield farming has become increasingly popular in recent years, as it gives users the opportunity to generate passive income with their cryptocurrencies. In traditional banking, users receive very little interest for depositing funds, while yield farming promises significantly higher returns. <\/span><\/p>\n

In addition, yield farming offers users the opportunity to participate in and acquire new cryptocurrencies that may increase in value in the future. It is also a way for users to diversify their cryptocurrencies by investing them in different liquidity pools on different platforms. <\/span><\/p>\n