Yielding

Yielding or yield farming does not describe the concrete process in web3, but overall idea of getting granted from combination of staking, lending, etc.

Such an approach can give a lot of returns, but it is crucial to be aware of risk.

The simplest way to yield is to deposit assets on platforms like Yearn. Entire process is made without further problems, because it happens “behind the scenes”.

Yielding is a very complex topic, which can be considered in different directions within DeFi. It even can free users from being locked in one protocol.

It gives a lot of possibilities for planning a strategy.

Let’s understand few advanced terms of yielding:

• Liquidity providers

The aim of LPs is to provide assets for decentralized exchange to enable trading.

You can check more about it here:

• Lending and borrowing

It is made like in traditional finance system, but in DeFi. What means that there are no middlemen who can forgive borrowing assets for someone. As it is validated on blockchain, there is no way to cheat customers.

• staking

Staking means literally locking assets for some amount of time and being granted with returns for that action. It secures proof of stake consensus model.

Risks

• smart contracts risk

Cyber attack can cause some huge outcomes of assets from smart contract address.

• Impermanent loss

Losses caused by price in liquidity pools.

• High transactions fees

fees are higher with every transactions, especially when there are made multiple times.