One of the hottest trends in cryptocurrencies is a financial activity that dates back to biblical times: lending money to earn interest.
Instead of just waiting for their ether or other digital coins to rise in value, cryptocurrency investors are now actively chasing returns by lending out their crypto holdings or pursuing other strategies to earn yield. Such “yield farming” can earn double-digit interest rates, far higher than the rates one can get with dollars.
It is a high-stakes endeavor. Investors run the risk of having their digital wealth stolen by scammers or erased by sudden bouts of volatility. The space is also largely unregulated. Yield farmers aren’t protected by the Federal Deposit Insurance Corp., which compensates depositors when banks fail.
Yet the promise of outsize returns in a low-yield environment has helped attract mainstream attention. In the past year, professional and amateur investors alike poured tens of billions of dollars into yield farming, according to industry analysts and data providers.
“Yield farming is not much different than buying high-dividend paying stocks or high-yield unsecured debt or bonds,” Mark Cuban, the billionaire owner of the Dallas Mavericks and an active crypto yield farmer, told The Wall Street Journal. “There is a reason they have to pay more