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description: Earn token by stake LP token.
---

# Yield Farming

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### What is Yield Farming?

Yield farming is the practice of staking or lending crypto assets in order to generate high profits or rewards in the form of additional crypto currency.

In short, the yield farming protocol incentivizes liquidity providers (LPs) to stake or lock up their crypto assets in smart contract-based liquidity pools. These incentives can be a percentage of transaction fees, interest from lenders, or governance tokens. This profit is expressed as a percentage of annual yield (APY). As more investors add funds to the associated liquidity pool, the declared profit value will decrease.

#### What is APY in Yield Farming?&#x20;

Yield growers, and most protocols and platforms, calculate estimated profits in terms of annual percentage yield (APY). APY is the rate of return earned for one year on a certain investment. Compound interest, which is calculated regularly and applied to the amount, is calculated in APY.

_"Quoted from_ [_<mark style="color:blue;">Coinmarketcap</mark>_](https://coinmarketcap.com/)_<mark style="color:blue;">"</mark>_
