Yield Farming Strategies
Yield farming maximizes returns by lending, LPing, staking, and compounding rewards. You`'ll learn conservative and advanced strategies plus risk checks.
Who Is This For?
- •Intermediate users seeking better DeFi yields
- •Cautious beginners wanting a risk-aware overview
Learning Objectives
- 1.Identify sources of yield: fees, interest, token incentives, staking
- 2.Compare single-sided, LP, leveraged, and aggregator strategies
- 3.Evaluate APY vs risk with a due diligence checklist
Sources of Yield
Before chasing APY, understand where it comes from. Some yields are sustainable, others are temporary bribes.
🌱 Where Does Yield Come From?
Trading Fees
When you provide liquidity to a DEX, you earn a cut of every swap that trades through your pool. On Uniswap v2, LPs earn 0.3% of every trade.
Real users trade tokens → pool collects fees → fees distributed proportionally to LPs based on their share of the pool.
Sustainable — driven by real economic activity. More volume = more fees.
📊 The Sustainability Spectrum
Rule of thumb: if the yield comes from people paying for a service (trading, borrowing, security), it's sustainable. If it comes from printing new tokens, it's temporary.
Strategy Examples
From conservative to aggressive — every strategy trades yield for risk. Choose what matches your experience level.
🎯 Compare Strategies
Single-Sided Staking
Low Risk · 3-10%Deposit a single token to earn yield — no pairing needed. Includes native staking (ETH), lending (Aave), and liquid staking (Lido).
Pros
- ✓ No impermanent loss
- ✓ Simple to understand
- ✓ Often liquid/withdrawable
- ✓ Low maintenance
Cons
- ✗ Lower yields vs LP farming
- ✗ Rates fluctuate
- ✗ Smart contract risk remains
- ✗ Liquid staking has depeg risk
🔄 Leveraged Looping Simulator
See how looping amplifies yield AND risk:
Risk & Due Diligence
Every farm should pass your personal checklist before you deposit a single dollar.
🧾 Tax Implications
In many jurisdictions, each of these events may be taxable:
Keep detailed records of every DeFi transaction. Tools like Koinly, CoinTracker, or DeBank can help.
✅ Pre-Farm Due Diligence Checklist
Check off each item before entering a new farm:
Common Mistakes & Gotchas
🌱 Golden Rule: Sustainable yield comes from real economic activity. If a farm's only value proposition is "high APY," it's paying you with inflation — and someone is left holding the bag when emissions end.
Knowledge Check
Name two sources of DeFi yield:
What risk comes with leveraged yield farming?
Why use a yield aggregator?
Which yield source is most sustainable long-term?
Why should you check a protocol's emission schedule?