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In our last lesson, we talked about yield farming and what it actually was.

Today, we’ll look at whether or not it’s really worth it.

Of course, the ultimate answer depends on your specific goals and needs.

We’ll go over some of the pros and cons of yield farming, plus possible gains and losses, and let you make your own decisions.

Whether you’re just curious or are looking for the best yield farming strategy, you’ll need to know about these risks.

The pros of yield farming include a guarantee that decentralized finance (DeFi) will keep trading open to everyone, no matter what their background or country or origin may be.

And all activities are public ones.

Also, there are many applications and exchanges out there that will let you participate in the yield farming process because it’s currently so very popular.

Finally, it’s totally straightforward to get started with yield farming.

You just need some cryptocurrencies and a supporting cryptocurrency wallet.

Some disadvantages include the possibility of inconsistent returns because of the various risks associated with yield farming.

Profitable strategies can also be challenging to figure out.

And if the process is based on a blockchain network like Ethereum, which has higher gas fees associated with each transaction, farmers will see lesser returns because the fees will take part of each transaction.

APR or Annual Percentage Rate is that percentage of your initial deposit you’ll be getting back within a year, and this can be quite a range depending on the token and the platform you choose.

In some cases, you can earn 8%, 15%, or even more.

But you may just as easily incur a loss due to the volatility of cryptocurrency tokens — unless, of course, you’re farming with stable coins.

Another possible loss is called impermanent loss, and that can happen whenever you provide liquidity to the liquidity pool.

The price of your deposited asset might change compared to when it was deposited.

Note, however, that this is an impermanent loss: it’s only a true loss when you withdraw your liquidity from the pool at a lower price.

Yield farming is usually thought of as a safer option when compared to cryptocurrency staking, but it’s still a high-risk and high-reward venture.

If you’re interested in investing, do your homework and learn as much about the market as you can so you can avoid most of the risks.

In our next lesson, we’ll look at some of the top DeFi yield farming platforms.

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