Yield farming is one of the most popular ways to earn passive income in crypto. While the concept might seem complex at first, learning how to farm yield on DeFi platforms is becoming more accessible. That is why Fintech Review has put together this short guide: 5 Steps to Farm Yield on Defi Platforms. Thanks to improved user interfaces, wallet compatibility, and educational resources, more users are now able to participate in DeFi and earn returns directly from their tokens.
At its core, yield farming involves providing liquidity or assets to decentralised applications in exchange for rewards. These rewards often come in the form of interest, trading fees, or governance tokens. The entire process is decentralised and permissionless, meaning anyone with a crypto wallet can get started.
In this article, we guide you through the key steps to farm yield safely and efficiently on DeFi platforms.
Step 1: Choose a Supported Wallet
Before you start farming, one of the first steps to farm yield is a crypto wallet that connects to DeFi platforms. The most popular options include:
Each of these allows you to store tokens, connect to dApps, and sign transactions. Make sure your wallet supports the blockchain network you intend to use, such as Ethereum, BNB Chain, or Polygon.
Step 2: Fund Your Wallet
You’ll need assets to begin farming. Most platforms support popular tokens like:
- Stablecoins (USDC, USDT, DAI)
- ETH, BNB, MATIC
- Platform-specific tokens (CAKE, AVAX, etc.)
You will also need the native gas token of the chain you’re using to pay for transactions. For Ethereum, this is ETH; for BNB Chain, it’s BNB.
Step 3: Select a DeFi Platform
Choose a reputable DeFi protocol to start farming. Some of the most widely used include:
Check platform documentation for supported assets, APY rates, and any risks or conditions before depositing your tokens.
Step 4: Provide Liquidity or Stake Tokens
Depending on the platform, you’ll either:
- Deposit tokens into a liquidity pool to earn a share of trading fees
- Lend tokens to earn interest from borrowers
- Stake tokens into vaults or farms that auto-compound rewards
- Participate in dual-token pools to earn yield on volatile pairs
Each method has a different risk profile. For beginners, stablecoin pools and lending platforms offer lower risk and easier tracking.
Step 5: Monitor Rewards and Withdraw
Once you’ve deposited tokens, the platform will start generating rewards. These can often be:
- Claimed manually
- Automatically compounded into your principal
- Paid out in the platform’s governance token
Use dashboards like DeBank, Zapper, or Yieldwatch to track your performance. When you’re ready, you can withdraw your funds and rewards back to your wallet at any time.
Risks to Consider
Always be aware of potential downsides:
- Impermanent loss if farming volatile token pairs
- Smart contract exploits if using unaudited platforms
- APY fluctuations, as rewards may drop as more users enter
- Bridge risk, if moving assets across chains
To mitigate these risks, use trusted platforms, keep your position size manageable, and stay informed about updates and audits.
Learning how to farm yield on DeFi platforms opens the door to passive crypto income. With the right setup and careful planning, users can earn consistent returns while participating in some of the most innovative areas of Web3.