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Yield Farming

Estimated reading: 3 minutes
Byepix Yield Farming is the same as DeFi Yield Farming in theory. But technically, it replaces the DeFi function with game mechanics.
Yield farming is a way to earn more crypto with your cryptos. Through Yield Farming, you can earn crypto by lending your funds to others through smart contracts.

Yield farming is somewhat similar to staking. However, the background to yield farming is much more complex. Most often, it works with users who add funds to liquidity pools, called liquidity providers (LPs).

Liquidity Pool; is a smart contract that holds the funds. Liquidity providers earn a reward for providing liquidity to the pool. This reward may come from the revenue provided by the DeFi platform, commissions, or another source.
Some liquidity pools may pay-out rewards in multiple types of tokens. Afterward, these reward tokens can be invested in other liquidity pools, and rewards can be earned from there also. The process can continue so. Even with this much knowledge, you can realize how highly complex strategies can emerge in such a short time. But the main idea is that the liquidity provider deposits their funds into a liquidity pool to earn rewards.
Farming requires a trading pair. This means you need to have more than one token to exchange funds between them.