Yield Farming is the activity of moving funds between multiple DeFi protocols to maximize yield. The term was coined when DeFi protocols started offering protocol tokens as incentives to bootstrap liquidity and activity. 

Yearn Finance launched in 2020 on Ethereum and is one of the pioneers in the yield optimization space. The first version of Yearn Finance optimized stablecoin yields across Aave, Compound, dYdX, and Fulcrum. It was a relatively simple strategy based on where the highest yield opportunities were available. Today, Yearn has multiple vaults where users can lock in their crypto tokens for high yields. These vaults employ multiple complex strategies and can switch between them based on market conditions. 

Where Yearn Finance grew up to become the leading Yield Optimization protocol during the DeFi Summer, Beefy Finance emerged as the leader on Binance Smart Chain. Beefy has scaled to 16 blockchain networks today and relies mostly on auto-compounding strategies. 

The practice of providing protocol tokens as incentive led to a situation where participants were constantly switching between different protocols and selling off the protocol tokens after claiming the rewards that put a downward pressure on the token price. Curve Finance came with an interesting incentive mechanism to address this. 

As a CRV token holder or a liquidity provider on Curve Finance, you can choose to convert your CRV tokens to veCRV (vote-escrowed CRV). veCRV is a CRV token locked into the protocol for a period of time in exchange for governance rights and additional incentives such as boosted CRV rewards. You can boost your rewards up to 2.5X by depositing CRV tokens which are in proportion to the liquidity provided by the users.

This presents a challenge for liquidity providers as they need to acquire more CRV tokens to access these benefits. Convex Finance provides a community centric approach to do this where the CRV tokens from multiple people are pooled together and the additional benefits are distributed amongst the liquidity providers. Not surprisingly, today 43% of veCRV tokens are controlled by Convex Finance.