Yield farming, also known as liquidity mining, is a practice in decentralized finance (DeFi) where users provide funds to liquidity pools and earn rewards in the form of additional tokens. These rewards are typically generated by transaction fees or newly minted tokens. With Ethereum's [[Proof of Stake]] system, for example, funds locked up in the DeFi liquidity protocols allowed nodes to earn and redistribute ETH earned by securing the network by validating transactions. Yield farming gained popularity in mid-2020 when various DeFi protocols started offering attractive incentives for users to contribute their assets. This incentivized individuals to lock up their cryptocurrencies in these protocols' smart contracts, thereby providing liquidity for trading pairs on decentralized exchanges.