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Yield Farming or How DeFi Helps Crypto Enthusiasts (Full guide)

Yield Farming is an investment practice in DeFi that is used to maximize profits. What investors do is generate profits from their assets without having to sell and buy them repeatedly.

**What Is Yield Farming?**

Yield Farming is an investment practice in DeFi that is used to maximize profits. What investors do is generate profits from their assets without having to sell and buy them repeatedly.

At DeFi, this possibility exists because many protocols allow for different ways of making a profit. For example, you can profit by staking a certain amount of… [read more!](https://guarda.com/academy/defi/defi-yield-farming/?utm_source=reddit&utm_medium=social&utm_campaign=YieldFarm-CryptoCurrency)

**How Does This Whole Process Work?**

Cryptocurrency farming consists of positioning our assets in favor of a platform to obtain a return. The platform on which we trust our currencies is responsible for returning those profits to us.

Liquidity providers deposit funds in a liquidity pool. This reserve feeds a marketplace where users can make loans, take out loans, or exchange tokens. The use of these platforms involves… [read more!](https://guarda.com/academy/defi/defi-yield-farming/?utm_source=reddit&utm_medium=social&utm_campaign=YieldFarm-CryptoCurrency)

**What Is Liquidity Mining?**

The goal is to generate greater liquidity. Thus, the money invested is transformed into an investment and a generator of rewards associated with that capital injected into the liquidity pool.

Liquidity Mining is a Proof of Stake (PoS) system. Although with some modifications in its operation. The primary mission is to generate governance or reward tokens to… [read more!](https://guarda.com/academy/defi/defi-yield-farming/?utm_source=reddit&utm_medium=social&utm_campaign=YieldFarm-CryptoCurrency)

**The Different Types Of Yield Farming**

There are different types of ways to earn tokens on Yield Farming, so, there are few ways:

**Lending**

Lending is another way to put our tokens in favor of a platform. Our tokens will be lent to other users, and therefore we will obtain a return over time. The venue is in charge of connecting both users, lender, and receiver in a P2P operation.

What Yield Farming participants are interested in is making a profit on this loan; this profit comes when… [read more!](https://guarda.com/academy/defi/defi-yield-farming/?utm_source=reddit&utm_medium=social&utm_campaign=YieldFarm-CryptoCurrency)

**Staking**

Staking is also part of Yield Farming; this may be the best-known method as blockchain as Tezos has popularized it. This system is seen in the Proof of Stake chains, which validate and create new blocks through staking.

In the absence of miners in these blockchains, there are validators, which leave their assets blocked so that the blockchain randomly uses these… [read more!](https://guarda.com/academy/defi/defi-yield-farming/?utm_source=reddit&utm_medium=social&utm_campaign=YieldFarm-CryptoCurrency)

**Advantages & Disadvantages of Yield Farming**

Yield Farming is an activity that, despite providing profitable returns on investment, carries certain risks inherent in crypto. There are some advantages and disadvantages and if you want to know them just read the full list in [our full article!](https://guarda.com/academy/defi/defi-yield-farming/?utm_source=reddit&utm_medium=social&utm_campaign=YieldFarm-CryptoCurrency) Thanks!



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9 Comments

  1. For those familiar with the Terra ecosystem, check out [Anchor Simulator](https://anchor-simulator.com/). It gives you an idea of the types of yield farming available and simulation of different methods. credit to u/zaazzz if he is on reddit or @ zaazzz on Twitter.

    ​

    If you are not familiar with Terra, it is worth a read. Between the stablecoin model, Mirror, and Anchor, it could be very influential as development persists.

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