Yield Farming
Moving assets between DeFi protocols to collect the trading fees, interest, and token rewards that each one pays to users.
The return has distinct components: swap fees from liquidity pools, interest from borrowers in lending protocols, and newly issued governance tokens distributed as incentives. Only the first two are revenue produced by users of the protocol; the third is issuance, whose value depends on what the reward token trades for when sold. Costs include network fees for each move, divergence loss in pools, and the risk that a contract is exploited or that an administrative key changes the rules. The word yield borrows from fixed income but does not mean the same thing: there is no issuer promising a rate, no maturity, no insurance, and an advertised annual percentage figure is an extrapolation of current conditions rather than a contractual return.
In practice
A strategy that supplies assets to a lending market and also collects that protocol's incentive tokens is earning from two different sources, only one of which is paid by borrowers.
The common misunderstanding
An advertised annual percentage yield is not a guaranteed interest rate; it extrapolates current conditions and often counts rewards in a token whose value varies.