How does farming work?
Yield farming is a multi-level investment strategy in DeFi that involves various income-generating activities and can be seen as a more complex and profitable way of extracting liquidity.
It allows you to earn passive income in the form of APY by depositing crypto assets into a smart contract based liquidity pool for the purpose of lending and borrowing.
Rewards can be paid out as a percentage of transaction fees, in the form of interest earned from lenders, or as governance tokens.
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lending
is useful for coin or token holders who can use a smart contract to lend crypto to borrowers and earn interest on the loan.
Lend
This means that if a farmer wants to start a new business but doesn’t have the funds, they can borrow the coins they need using the tokens they currently hold as collateral. The collateral is necessary to ensure that the borrower does not disappear with the loan.
This process also makes it possible to make money on the price development of the collateralized coins.
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