Liquidity Pool Token and Yield Farming
Yield farming is a method used to maximize return on investment by investors in DeFi, using various products in the DeFi ecosystem. While there are numerous methods to optimize returns using yield farming, the most popular approach is to use the liquidity tokens given by the DeFi platforms.
Like all other tokens, a user can use the liquidity pool tokens during the period of the smart contract. A user can therefore deposit this token on a different platform that accepts the liquidity pool token in order to get additional yield to maximize the return.
Therefore, the user can compound two or three interest rates by using yield farming and eventually increase the returns.
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