Yield farming is the practice of providing liquidity or staking assets in DeFi protocols to earn rewards, often in the form of additional tokens.
You deposit funds into a liquidity pool or lending protocol, and in return you earn interest, trading fees and sometimes extra reward tokens.
Early protocols offer generous rewards to attract liquidity, which can produce eye-catching annual yields, at least temporarily.
Yield farming involves smart-contract risk, impermanent loss, token price crashes and sometimes outright scams that drain funds.
Only use reputable, audited protocols, and never invest more than you can afford to lose. High yields always carry high risk.
Yield farming can generate real returns, but it is one of the riskiest corners of DeFi.