Yield Farming
Yield Farming involves investing into whats called a Liquidity Pair:
It is similar to trading e.g when you trade BTC/USDT – thats called a trading pair.
Let’s say a Liquidity Pair is Cake/BNB. This means you invest equal amounts of both Cake and BNB
This takes place on “Yield Farms” which are basically Crypto decentralized lending farms. They take ALL the investments in the farm and POOL them and use them to increase their own (and other partners) Token market cap.
By doing so The FARMS Token price rises (often dramatically) and they REWARD the investors in the Farm with RIDICULOUSLY high yields – some as high as 8000% APY most APYs average in the hundreds of % (as a member of the pool you share in a daily payout of this).
This is the potentially GREAT rewards.
The risk comes from something called: Impermanent Loss.
With the liquidity pair, there will always be Volatility as one side of the coin (pardon the pun) will be stronger than its pair and so you will most likely watch your investment go down very low at certain points (of course it can go up the next hour, day etc…hence the psycho nature of Crypto.
you can read more about Impermanent Loss here:
https://coinmarketcap.com/alexandria/glossary/impermanent-loss
With that said, Yield Farming is an amazing way to get some great REWARDS if you have the stomach for the deep dips.
Alternatively, Staking is just taking one of your coins, locking it up with a Staking provider who will pay a guaranteed reward % on a daily basis WITHOUT the potential for Impermanent Loss.
Good Farms:
https://autofarm.network/ (great place to stake Cake)
I personally prefer harvest, autofarm and pancakeswap but there are LOTS of good places. Just be aware – its decentralized do invest wisely as if you do this with a NEW token, the owners of said token can pull the rug out from everyone and TAKE THE MONEY AND RUN and there is nothing we can do about it.