ARTH Guidebook
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Introduction to Farming

What is farming?

Farming is the practice of staking or lending crypto assets in order to generate high returns or rewards in the form of additional cryptocurrency. This innovative application of decentralized finance (DeFi) has skyrocketed in popularity recently thanks to further innovations like liquidity mining.
In short, farming protocols incentivize liquidity providers (LP) to stake or lock up their crypto assets in a smart contract-based liquidity pool. These incentives can be a percentage of transaction fees, interest from lenders or a governance token. These returns are expressed as an annual percentage yield (APY). As more investors add funds to the related liquidity pool, the value of the issued returns decrease accordingly. Liquidity mining occurs when a yield farming participant earns token rewards as additional compensation.
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