Anton Dzyatkovskii Hacker Noon profile picture

@anton-dzyatkovskiiAnton Dzyatkovskii

CEO and co-founder of Platinum Software Development Company. Blockchain enthusiast, blogger.

The crypto industry offers users a spectrum of investment tools: synthetic assets, liquidity pools, index tokens, lending solutions, yield farming, hodling, etc. From among the big list, yield farming stands out the most because it promises the highest returns promised by any project.

Coming from the traditional financial environment with low interest rates, beginners and small investors are drawn to the idea of quick gains, requiring just a few clicks to start making profits.


But with high returns come high risks and important nuances, like the risk of impermanent loss, the fact that APY is only an estimation that gets adjusted daily, the number of fees, as well as price and smart contract risks. In the end, it’s questionable whether yield farming is a good income-generating opportunity for users who have smaller sums of money to play with and not enough knowledge to leverage advanced farming strategies.

So, is yield farming cost-effective? What are the risks and how do you mitigate against them?

Is Yield Farming That Simple?

Yield farming or liquidity mining is a way to make more cryptocurrency with existing holdings by locking funds in the protocol and earning rewards for it. In basic terms,