What is Yield Farming?
Yield farming is the practice of staking or lending crypto assets to generate high returns or rewards in additional cryptocurrency. It could be called liquidity dumping, and it is the only incentive to keep a Decentralized Exchange (DEX) operating. Due to the market dynamics, we see it as a quick transfer of money from the LESS RICH to the RICH or the BIG BAGS (often referred to as people who own many cryptocurrencies). Yield farming should, however, offer everyone a way to make money in the long run. Most Decentralized Exchanges (DEXs) offer enormously high APRs (annual percentage rate) and APYs (annual percentage yield) to attract users. However, this also attracts the guys with the BIG BAGS, called THE RICH. Thus, the concept of yield farming becomes a monopoly.
In the crypto space, the investors include the BIG BAGS and the AVERAGE users; the former payout their profit, which means they take away the average users’ money. A quicker way would be to transfer it directly to the BIG BAGS (thus referred to as liquidity gifting). This inevitable USER-TO-WHALE money transfer is further enlarged by generating Decentralized Exchange (DEX) tokens virtually out of thin air as a reward.
Where does the money come from when someone cashes out? Yes, from those who do not cash out (early enough), and the weaker ones without natural patience and unnatural fear have no choice but to also cash out, but with a loss and call the project a SCAM/RUG, although it was just the standard market dynamics and the greed of the big bags.