Yield farming is a cryptocurrency investment strategy that hopes for higher returns than most traditional investments offer today. It could be an opportunity for the brave to win big – or for new currency holders to manipulate prices. The US Securities and Exchange Commission has alerted the industry that it has reservations, particularly on whether the practice should be regulated as a securities offering.
When you deposit money at a bank, you are effectively taking out a loan in exchange for interest. Yield farming, also known as yield or liquidity harvesting, is the lending of cryptocurrencies. In return, you receive interest and sometimes fees, but these are less significant than the practice of supplementing interest by issuing units of a new cryptocurrency. The real profit comes when the coin appreciates in value quickly. It’s like banks attracting new depositors with the gift of a tulip – during the Dutch tulip boom. Or a toaster, if toasters were subject to wild speculation and price swings.
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