Yield farming
Also known as: liquidity mining, farming
Moving crypto between DeFi protocols to maximise returns; rewards are generally income and the moves can trigger disposals.
Definition
Yield farming is actively allocating crypto across DeFi protocols — lending, liquidity pools, staking — to earn the highest available returns, often paid as reward tokens. Tax-wise, reward tokens are generally revenue income at receipt, while entering and exiting pools and swapping tokens can be disposals. The frequent activity points toward revenue treatment and demands strong transaction-level records.
Example
You deposit tokens into a pool and harvest reward tokens weekly; the rewards are income, and swapping or exiting positions can be disposals.
Jurisdiction notes
- South Africa: Yield-farming rewards are generally revenue income; pool entries/exits and swaps can be disposals — frequent activity suggests revenue treatment.