Centralized finance is necessary, especially for DeFi crypto investors

If you're paying attention to developments in the cryptocurrency space, you've likely heard of decentralized finance and of the yield farming trend that helped it get over $9 billion worth of crypto assets locked in it.

In short, yield farming - also known as liquidity mining - sees users generate rewards with their cryptocurrency holdings by interacting with DeFi protocols that either let them lend or borrow tokens.

Finance act like smart savings accounts, helping users find the best yields across the DeFi space while rewarding them with YFI tokens.

Ever since Compound launched its governance token, the total value locked in the DeFi space surged, as users started moving to farm yield as quickly as possible.

Users can lend stablecoins on DeFi protocols, so the risks appear to be next to none: If the tokens they are farming lose value, they're still earning rewards for lending funds, and these rewards are well above 0.67% on most platforms.

There are hidden risks associated with DeFi and yield farming.

Popular DeFi protocols are developed by small teams with limited resources, which can increase the risk of smart contract bugs and vulnerabilities.

As we've seen before, if you are investing in the DeFi space, it's always better to bet on diversification instead of short-term gains.

A DeFi portfolio should have exposure to top cryptocurrencies in the space, ensuring you don't lose everything to scams, unexpected market moves or technical issues, and invest in potential gems while it's still early.

True decentralization is seen as a strength in crypto, and we can use decentralization to our advantage in investing in DeFi and yield farming.