<p><strong>Yield Farming</strong> is an advanced <a href="/NewSite/encyclopedia/defi/" class="ency-link">DeFi</a> (Decentralized Finance) strategy where users earn rewards by providing liquidity to decentralized exchanges (DEXs) and other DeFi protocols.</p>
<p>Yield farming matters because it incentivizes liquidity provision, enabling smoother trading and reducing price slippage on DEXs. For example, users can lock their tokens in a <a href="/NewSite/encyclopedia/liquidity-pool/" class="ency-link">liquidity pool</a>, earning a share of trading fees and additional tokens as rewards.</p>