Welcome back.
I'm Scarlett Sieber from Money 2020, and this is Jargon Translator where we decode the finance slang that sounds like agriculture, but it is all about crypto gains.
Today's term yield farming.
Yield farming is basically earning interest on your crypto by lending or staking it in DeFi platforms.
You lock up your tokens and in return you get rewards.
Usually more tokens.
Think of it like putting your money in a high yield savings account, except instead of in a bank, it's a smart contract running on the blockchain.
Why do people love this?
Because the returns can be wild, sometimes way higher than traditional banks.
We're talking double digit APIs that make your 0.01% savings account look like a joke.
And for a while during the DeFi boom, people were stacking tokens like they were stacking sneakers, and I love my sneakers, but Here's the catch it is risky, like really risky.
Smart contract bugs can drain your funds overnight.
Platforms can get hacked, and token prices, they swing harder than a TikTok trend cycle.
You might earn 100% APY in tokens, but if that token crashed by 90%, your farm just turned into a desert.
And then there's the impermanent loss, a fancy way of saying you can lose money even while providing liquidity.
It's like planting seeds and watching the soil disappear.
This is brutal.
Yield farming exploded during the DeFi summer of 2020 when everyone was chasing insane returns.
Today it's still around, but the hype has cooled as regulators start paying attention and investors realize free money usually comes with the fine print.
Next time you hear yield farming, don't picture tractors, picture crypto hustlers chasing APIs like they're trending TikTok sounds.
Yield farming, when your money works the fields, but sometimes the harvest is just weeds, and that is your jargon translated.
