Yield Farming is a form of earning that allows you to earn more cryptocurrencies with the cryptocurrencies you have. Yield Farming allows you to securely lend your cryptocurrency through a smart contract. In return for this service, you will receive gift tokens in the form of cryptocurrencies.
In other words, we can call it Liquidity Mining because liquidity is provided. The reason why the Yield Farming model has become popular is related to decentralized finance, that is, the spread of DeFi projects in recent days.
Yield Farming actually performs the work of Aave (LEND), Compound (COMP) and Maker (MKR) applications under the roof of DeFi. To explain by example, investors lock the ETH they own in one of these 3 networks.
Then, whichever network he preferred, gift liquidity comes from that network. When it reaches the end of maturity, it can turn it into ETH, which it locks again.
In 2020, DeFi projects attracted a lot of attention. Thanks to this interest and popularity, the Yield Farming application has also become quite popular.
Accordingly, the lending system works as follows; The crypto currency user adds the crypto coins he / she owns to the pool. It is held for a certain period of time to be processed.
When the crypto money is added to the pool, you cannot access it until it expires. For this reason, you cannot make any changes when the type of coin invested in decreases. However, Yield Farming is different from conventional time deposit accounts.
Because the system gives a gift token in exchange for the locked coin. In addition, the investor can use the asset added to the pool for other purposes, provided that the interest rate does not change during the maturity period.
The token gifted in the Yield Farming model is usually Ethereum. Although this reward system has been taking place in the Ethereum ecosystem so far, it seems that cross-chain bridge developments will make such DeFi applications independent in the future.
