Yield Farming (YF) is a strategy that involves depositing assets in exchange for rewards. An effective YF strategy allocates assets to maximize their yield while reducing the risk of loss.

These farming deposits can be used to:

• enable staking,
• grant participating, voting, or other rights;
• provide liquidity to trading, or lending, pools that generate fees; and/or
• reduce the amount of assets circulating, making them scarcer and consequently increase in their value.

Some projects reward the depositor with tokens that they control and issue. In cases like these, it is important to understand if the increased supply is not diluting the value of each token more than the reward is worth. For example, a reward of 10% can be offset if the underlying asset’s value is diluted more than 1.1x.

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