> For the complete documentation index, see [llms.txt](https://famswaps-organization.gitbook.io/famswap/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://famswaps-organization.gitbook.io/famswap/yield-farming.md).

# Yield Farming

<figure><img src="/files/zm1q9Eux6zSfWCNImlzr" alt=""><figcaption></figcaption></figure>

Yield farming offers an opportunity for liquidity providers to earn token rewards by locking their LP tokens into a smart contract. This incentivizes users to mitigate the risk of impermanent loss associated with providing liquidity. By participating in yield farming, users can optimize their returns while taking into account the potential effects of impermanent loss.

FamSwap Farms allow users to support FamSwap and earn staking rewards by staking LP tokens (Liquidity Provider tokens).

Check out the Farming Guide to start liquidity mining.

> Compared to the FAX Pool, Farms offer higher returns but also come with the risk of impermanent loss. It's worth taking some time to understand it properly before engaging in liquidity mining.&#x20;
>
> Read this article by Binance about impermanent loss to learn more.

## Reward Calculation

The Annual Percentage Yield (APY) of the farm consists of two parts:

1. Rewards earned from providing liquidity (obtained from transaction fees)
2. Token rewards earned by staking LP tokens (Liquidity Provider tokens) in the Farm.

Why are there two parts? Because when you stake your LP tokens in the Farm to earn tokens, you are still providing liquidity to the liquidity pool, and therefore, you can also receive LP fee incentives simultaneously.


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