Yearn earns income from lending, liquidity mining and trading fees. This income is often increased using leverage.
Collateralized lending is when an asset is lent in return for a yield paid by the borrower. The borrower has to lock up a greater amount of collateral than the value of the loan to incentivize the repayment of the loan.
Admin key holders change lending protocol adversely, e.g. change the interest rate model in such a way that discourages borrowing
Smart contract risk of interacting with lending protocols
Low demand for borrowing the asset causes low lending yields
Collateral price falls causing the lending protocol to become undercollateralized
Lent assets become unavailable to withdraw because the utilization ratio becomes too high
Delays or inability to withdraw assets from the lending protocol in an emergency
Liquidity mining involves interacting with a protocol to earn the protocol’s native tokens. The interaction can be as simple as staking an asset in a protocol’s staking contract, or more complicated such as staking SNX to mint sUSD in Synthetix to earn SNX rewards.
In most cases the liquidity mined token is exchanged for the Want token on an AMM.
Admin key holders change protocol adversely, e.g. introduce penalties for withdrawals
Smart contract risk of rewards contract
Smart contract risk of AMM used to exchange the liquidity mined token for the Want token
Fall in price of token being farmed
Liquidity of liquidity mined token on AMM is reduced or removed
Delays or inability to withdraw liquidity in an emergency