What is yield farming? Liquidity mining and risk analysis of APY
2026-07-31 16:33:24
According to CoinMeta, yield farming refers to the practice where users deposit tokens into smart contracts, and the protocol utilizes these tokens for productive purposes, with users receiving a share of the value generated from these activities. Liquidity mining is a form of yield farming, where users provide liquidity on decentralized exchanges (such as Uniswap or Curve) in exchange for transaction fees. The yield of yield farming is typically expressed as an annual percentage (%) or an annual interest rate, but both figures can be misleading. The risks associated with yield farming include declines in token prices, vulnerabilities in smart contracts, and unexpected losses. Unexpected losses refer to situations where the price of the deposited tokens changes after providing liquidity, resulting in a decrease in the user's asset value.
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Source:Cryptonews
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