Yield Farming: A Comprehensive Guide On Why Not To Do It (2025)

Level: Advanced

Yield Farming, pointless and exceedingly risky. As experts in Bitcoin for many years now, we’ve seen even the most seasoned investors get swept up in the hype and end up utterly rekt.

Every few weeks/months we’ll see another post pop up of how a yield chaser has lost everything and has now “learnt their lesson” (or not). We know it sounds exciting and the promise of passive income and profits abound is tempting, but it’s all just a scam at worst, and mathematically stupid at best.

Contents

• What Is Yield?

• What Is Yield Farming?

• What Do Yield Farmers Do?

• Liquidity Providers & Liquidity Pools

• Chasing Yield Encourages Terrible Tendencies

• There Are Huge, Huge Risks Everywhere

• It’s Mathematically Pointless

• FAQ

What Is Yield?

Yield is simply the income an investment returns over time and is normally expressed as a percentage per year. For example the yield that cash can earn in an interest account is called interest and might be something like 3% p.a.

Yield is also called different things depending on what financial asset you’re referring to. In stocks it’s usually referred to as a dividend, while in bonds and cash in a bank account it’s referred to as interest.

What Is Yield Farming?

As the DeFi (Decentralized Finance) degens of the world have to invent catchy new phrases or terms for everything to make themselves feel important, yield farming was coined. This is where you “farm” (you know like farmville) various opportunities to get an income from the existing crypto assets you own.

Yield farming often involves moving your assets around from one “decentralized” trading platform to another, constantly chasing the highest yield possible in order to get the best returns possible. Various protocols can allow you to earn interest, grow your capital via stacking or providing liquidity all with the goal to generate yield.

The yield farming rewards earned are often referred to as a form passive income, but just like the term “decentralized” which gets thrown around ad infinitum, it’s not really accurate.