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Questions and Answers
What is one risk associated with yield farming?
What is one risk associated with yield farming?
- Impermanent loss (correct)
- Increased liquidity
- Guaranteed profits
- Decreased gas fees
What are common methods of yield farming?
What are common methods of yield farming?
- Mining cryptocurrency
- Lending assets, staking cryptocurrency, and becoming a liquidity provider (correct)
- Buying and selling crypto assets
- Trading stocks and bonds
What is DYOR and how can it help with yield farming?
What is DYOR and how can it help with yield farming?
- DYOR is a type of smart contract and it can increase rewards in yield farming
- DYOR is a research method and it can mitigate risks in yield farming (correct)
- DYOR is a DeFi protocol and it can reduce gas fees in yield farming
- DYOR is a type of cryptocurrency and it can guarantee profits in yield farming
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Study Notes
- Yield farming is using crypto assets to generate passive income or yield.
- It involves providing liquidity to DeFi protocols, or lending or staking crypto assets in exchange for rewards.
- Yield farming has risks, such as impermanent loss, bugs in smart contracts or protocols, and exorbitant gas fees.
- Yield farmers must do thorough research before committing their funds to a yield farm.
- Investigating the team, security, type of token, and timeline associated with the investment are common ways to do research.
- Yield farming uses smart contracts to lend crypto assets and receive rewards.
- Lending assets, staking cryptocurrency, and becoming a liquidity provider are common methods of yield farming.
- Yield farming is part of the decentralized finance (DeFi) ecosystem.
- DYOR (doing your own research) can help mitigate risks but cannot entirely prevent crypto losses.
- Yield farming allows for building a passive income stream.
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