Ethereum

A Canadian Investor’s Guide to Ethereum Yield Farming

ByDylan Callaghan Published On:

Decentralized finance, or DeFi, allows for obtaining a higher yield on cryptocurrency than using stocks. Traditionally, the most used way is yield farming, which rewards all users who lend their crypto or put it in a liquidity pool.

However, the terminology and process is quite confusing, which is what I am going to try and address.

What is Yield Farming?

In crypto economics, liquidity mining, also known as yield farming, is a set of protocols that DeFi allows others to lend or stake their currency to receive a reward.

It can be thought of more as an act of active investing than passive saving, and so while simple staking is like getting a fixed interest rate on your bank account, advanced yield farming is like searching the entire internet, tracking down the best deals on whatever will maximize your reward, even though it might be a little more complicated and take a bit more time.

Yield farming is likely to be more lucrative than staking, yet there are more complexities. 

How to Get Started

1. Choose a Secure Ethereum Wallet

Investors need a wallet compatible with the DeFi app, which can be either MetaMask, Ledger, or Trezor, in order to invest in what DeFi has to offer. 

I have used MetaMask for the most part, primarily because it is well-known and trusted.

2. Acquire ETH or Stablecoins

The majority of yield farming requires stablecoins (such as USDC, DAI, USDT) or Ethereum. They can be bought by Canadian investors in an exchange that accepts CAD. 

I utilize Bitbuy for the most part. They’re one of the more trusted Canadian exchanges.

3. Select a DeFi Protocol

Popular platforms include:

  • Aave: For borrowing and lending ARB.
  • Compound: Offers depositing returns to the lenders based on compounded assets.
  • Curve Finance: Pools that focus on stablecoins with less impermanent loss.
  • Uniswap/SushiSwap: Decentralized exchanges that include liquidity rewards.

It is important to compare the rate of interest and other rewards along with penalties when committing finances.

4. Deposit and Track Earnings

Put crypto into your pool of choice. Auto-compounding includes other sites with a few manually collected rewards. It is best to begin with a small size.

5. Consider Advanced Strategies

Other investors do so-called stacking strategies and transfer the rewards between protocols to maximize payoffs. This comes, of course, with the benefit of harnessing more potential profitability, but one is also exposed to the market to a greater degree, and there is a risk of the underlying code being faulty.

Risks to Consider

  • Smart contract vulnerabilities: A bug or exploit can result in a loss.
  • Impermanent loss: When the successful spot reduces, it can lead to changes in liquidity pool net returns that pull the price down.
  • Protocol risk: The newer protocols are riskier.
  • Tax compliance: The rewards earned through yield farming are usually subject to tax in Canada.

Tips for Canadian Investors

  • Start small to become familiar with protocol mechanics.
  • Add portfolios to DeFi Pulse or Zapper.
  • Invest in many opportunities and platforms. When one fails, you will not lose everything.
  • You should ensure that a project is professionally audited (as though there were a seal of approval) before you invest, and monitor its community decisions and updates.


Yield Farming Opportunities

Canadian investors looking to venture into yield farming on Ethereum have a few options in 2025. 

  • As the numbers indicate, loans on ETH offered by Aave are in the 3 to 5 percent range, but the interest rates fluctuate with supply and demand. 
  • Compound yields around 2 to 4 percent to lending to DAI and is a more predictable option because it includes the utilization of a stablecoin. 
  • Curve Finance is 4-6 percent USDC/DAI pools that help to minimize impermanent loss because of stablecoin pairing. 
  • Liquidity pools on Uniswap v3, such as ETH/USDC, will have higher potential returns of 5-8% but will need to be monitored. 
  • Likewise, in SushiSwap, the ETH/USDT pool earns around 6 to 10 percent, and the reward will be combined with the LP fees as well as SUSHI tokens.


Resources for Learning DeFi

Rates and rewards change constantly, making it hard to keep up. Guides on different topics like yield farming, staking, and liquidity are thoroughly explained on sites like CryptoManiaks. These guys are much smarter than I am, and have a ton of valuable resources.

Investing in Canada gives the opportunity to leverage the resources to increase the knowledge of the strategies, risk analysis, and approach to DeFi with greater confidence.

Final Thoughts

Yield farming could provide another alternative to Canadian investors who want to make decisions outside of the usual investments like stocks. Despite its high returns, making smart decisions in the DeFi field requires planning, risk awareness, and education.