# Yield farming {% embed url="" %} ## What is Yield Farming? **Yield farming**, or liquidity mining, is a method of earning rewards as a result of providing tokens for liquidity.\ For simplicity’s sake, farming can be likened to staking, but there are a few key differences between the two practices.\ Farming is done by **Liquidity Providers**, who are users that lock their tokens in liquidity pools.\ In turn, **Liquidity Pools** are smart contracts (**Vaults**), in which a certain number of tokens are located.\ In exchange for locking in liquidity to a certain pool, providers receive [rewards](/use/farming/concepts/reward-token.md). ### Risks One of the most important distinctions between farming and staking is the heightened risk inherent.\ First and foremost, we are referring to the risk of Impermanent loss. Impermanent loss can occur as a result of price volatility for one or both of the tokens in a farming pool.\ The higher the volatility is for one token relative to the other, the higher the chances will be of impermanent loss occurring.\ From this, it stands to reason that the most stable form of earning in Farming Pools comes from the stablecoin pools.\ We highly recommend that anyone looking to become a liquidity provider familiarize themselves with the risks of Impermanent loss. This will help you make the most out of farming and prevent you from running into any unpleasant surprises.\ There are also IL calculators that you can use to help in the decision-making process, like this [one](https://dailydefi.org/tools/impermanent-loss-calculator/). --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.flatqube.io/use/farming/concepts/yield-farming.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.