Yield Farming is a DeFi protocol that refers to the process of lending out your cryptocurrency assets to earn rewards. It’s a “farm” where you, the farmer, are handing over your valuable digital asset (your seeds) and getting a promise in return that’ll you get your seeds back after it’s reaped. Yield Farming rewards users for providing their digital assets as collateral for borrowing other tokens or participating in smart contracts that are initiated on decentralized exchanges.

Yield farming is a term used to describe the act of lending and borrowing cryptocurrencies in order to earn passive income for the lender. Yield farming borrows from concepts such as token staking (where investors lock up funds for a set period of time earning interest) and decentralized finance (DeFi).

Just as a bank takes a deposit from a customer and pays him 1% interest and then loans that same amount out to another customer and charges 5% in interest, a decentralized protocol will utilize the same strategy but with a smart contract as the intermediary which reduces the cost and increases efficiency. DeFi allows you to earn yield on assets that would otherwise be sitting idle in an exchange or wallet. Ethereum provides the most developed, open, and accessible ecosystem for yield farming, whether through staking in Ethereum 2.0, or in other third-party applications which act as pools for deposits.

Efficiency in the blockchain world has its own cost. Thus, a user can decide if it's worth the configuration of himself or herself with a web3 wallet, to go through several pages that contracts send him or her to, to approve transactions, select gas fees, and so on... And yet it may make sense for a casual crypto enthusiast who wants some extra yield on his/her regular crypto holdings. But when you have asset management as your main occupation, then automating this process starts making sense - unless you like to torment yourself.

Forget about the hassles of yield farming on your own--AscendEX has you covered. We handle all of the backend integration with DeFi protocols, allowing you to take advantage of lucrative yield farming opportunities without needing blockchain expertise on your own or complicating gas fees. As DeFi (and the underlying protocols) becomes more sophisticated, a concern is that it may become more difficult for users to keep up with new developments and changes in the market. AscendEX will offer subscriptions to pure “yield-driven” strategies for users who focus on maximizing their yield on principal rather than on accumulating DeFi governance tokens.

Regardless of where you fall in the DeFi Yield Farming spectrum, however, there is money to be made in this emerging industry. Over time, we expect that more and more projects will adopt these protocols and that it will become a multi-billion dollar industry. As the trend grows, so will the available yield farming opportunities.