Yield Farming
Definition
Earning rewards by providing liquidity to DeFi protocols.
Yield Farming is an advanced DeFi (Decentralized Finance) strategy where users earn rewards by providing liquidity to decentralized exchanges (DEXs) and other DeFi protocols.
Yield farming matters because it incentivizes liquidity provision, enabling smoother trading and reducing price slippage on DEXs. For example, users can lock their tokens in a liquidity pool, earning a share of trading fees and additional tokens as rewards.