What Is Decentralized Finance DeFi and How Does It Work?

High yields tend to compress as more yield farmers start to move funds into a high-yielding farm, affecting your returns. From a capital-raising standpoint, DeFi is the successor to initial coin offerings. Most of the ICOs of 2016 and 2017 were junky digital IPOs in which speculators traded ether tokens to invest in hundreds of questionable projects. There was almost no disclosure, and investors had no real equity or voting power. But as Coinbase expanded and became more mainstream, it was forced to pay greater attention to regulatory demands.

what is defi yield farming

LPs can earn a steady income from trading fees and yield farming rewards without worrying about dramatic price swings. The DeFi liquidity mining space is abundant with this kind of staking or farming opportunity, and more pools and protocols emerge by the day. Those yield farming crypto can stake their LP tokens in various protocols and liquidity pools for as long as they may choose — from a few days to several months. Polychain’s most ambitious investment foray to date has been its backing of a phenomenon known as decentralized finance, or DeFi, which uses blockchain technology in peer-to-peer applications.


While yield farming can be a lucrative way to earn yields in the crypto market, it is also one of the riskiest activities you can engage in. These tokens are locked in a smart contract, which programmatically rewards users with tokens as they fulfill certain conditions. When it comes to Compound’s governance, for example, Polychain is the second-most-powerful voting bloc behind Andreessen Horowitz.