The DeFi industry has been gaining momentum since 2020, offering a new perspective on the world of finance and a new way for investors to make money. 

In its essence, DeFi, also known as Decentralized Finance, is an ecosystem of applications and services built on public blockchains.

Yield farming and staking are gaining momentum on the DeFi market right now.

Farming, but with yields

Yield farming, often referred to as “liquidity mining,” is a lucrative way to make money using the cryptocurrency you already have.

Simply put: you lend your crypto assets to a decentralized platform through smart contracts and without intermediaries,  and you get rewarded for it. 

This process is a so-called automated market maker (AMM) model, but in crypto: it involves liquidity providers, users who deposit their assets, and liquidity pools, all the assets at decentralized exchanges available for trading.

In most cases, liquidity providers get governance tokens in return for depositing their crypto assets.

This process resembles the way bank loans work: the bank loans a person money and expects it to be paid back with interest. With yield farming, crypto investors act like banks.

DeFi doesn’t always mean safe

Even though DeFi is a great way for investors to make money, especially if they use complex strategies like borrowing money from decentralized platforms and staking it somewhere else at a lower percentage than their yield returns, it is not as safe as you might think.