What is Farming?

Yield farming is a way of generating revenue by simply locking up your crypto to earn rewards. It is also called Liquidity Mining, and it works with users called Liquidity Providers (LP) that add funds to Liquidity Pools found in Decentralized Exchanges (DEX).

In return for providing liquidity, LPs get rewarded that may come from fees generated by the underlying Decentralized Finance (DeFi) platform or some other source. Yield farming across DeFi is facilitated by smart contracts, pieces of code that automate financial agreements between two or more parties for lending, borrowing, or staking coins to earn interest or receive incentives.