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DeFi Tip: What is Yield Farming?

Atomic Swap is inter-chain, that is, between chains.

But what if this is on-chain?

That's precisely why decentralized exchanges like Uniswap and PancakeSwap do.

They are masters in their sectors and therefore command colossal valuations.

The main attraction with DEXes employing AMM models is their reward scheme.

Suppliers of liquidity, called Liquidity providers, earn a portion of fees from a "pool," boosting their baseline.

And there is more:

Representative of their portion of liquidity provision, they receive Liquidity Provider tokens.

These tokens can be used to "farm" for even more yields.

If those LP tokens are staked within the same DEX or another dApp—often within the same network—then a Liquidity Provider can choose to "farm" by staking LP tokens to a higher-yielding pool for even more rewards.

It is an exciting innovation in DeFi that's keeping investors fixated.

For more interesting tips and facts visit our Education Centre.

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