Let's be honest. The whole DeFi space, and particularly yield farming, can seem like the Wild West. From limitless APYs to meme coins galore, the promises of DeFi are out there — so are the risks. As a blockchain columnist with a background in finance, I've seen enough to know that separating fact from fiction is crucial. So before you make plans to dive headfirst into the yield farming pool in 2025, here are a few myths to squash.

APY Is The Only Metric

High APY is seductive. It’s that shiny object that lures you in. Only comparing APY is the equivalent of choosing a spouse based on their initial proposal for a prenup. It's short-sighted, and frankly, a little naive. An insane APY often signals extreme risk. Look, if an idea sounds too good to be true, it is too good to be true. A new platform promising a 1000% APY? That's not "innovative," that's a red flag.

Instead, look at the underlying protocol. Is it established? Has it been audited? What's the total value locked (TVL)? Take dominant players such as Aave, Compound, or Curve. Of course, the APYs may be less attractive, but that’s OK when the risk is cut by an order of magnitude. Think of it like this: would you rather have a guaranteed 5% return on a blue-chip stock, or a maybe 50% return on a penny stock? Your own risk tolerance will determine the answer but remember to never confuse gambling with investing.

Impermanent Loss Is Just A Theory

Impermanent Loss is very real. It’s not an esoteric issue that happens to other people. If you're providing liquidity on an AMM like Uniswap, you're exposed. It’s the new cost of admission to the yield farming party.

Think of it like this: you loan your friend $100 worth of Apple stock and $100 worth of Tesla stock. A month later, Apple is now valued at double Tesla’s value. Your friend returns the money, but instead of $200 in cash, it’s $150 in Tesla stock and $50 in Apple stock. You missed out on the Apple gains! That's impermanent loss in a nutshell.

Platforms like Balancer, with their multi-asset, customizable pools can help limit impermanent loss by providing the ability to reweight asset weightings in a custom pool. Stablecoin pools on Curve Finance are mathematically constructed to avoid it. Don’t be misled – it’s never not a consideration.

DeFi Is Entirely Decentralized

This is a dangerous myth. Although DeFi’s promise may be decentralization, it does not hold true in practice. Most interoperable platforms today are governed by a centralized group of developers or token holders. This creates vulnerabilities.

Keep in mind, you’re putting your money in the hands of smart contracts. Who wrote those contracts? Who controls the upgrade keys? A “rug pull” can occur even on well-known platforms if the development team behind a project chooses to abscond with the money.

Diversify your holdings across multiple platforms. Lesson three — Don’t centralize all the eggs in one (Western) basket. And as a final note, always be suspicious of projects that seem to offer the moon and stars but aren’t transparent.

Yield Aggregators Are Risk-Free

Yield aggregators such as Yearn Finance and Beefy Finance automate the process of yield farming. Their goal is to maximize return for a level of risk taken. They're not magic wands. They're complex systems with their own vulnerabilities.

Aggregators deploy your funds across various strategies. All of a sudden, if one of those strategies doesn’t succeed, you’re out all that money. They overcharge too, their fees cut into your bottom line.

Think of them as fund managers. You’re just paying someone else to do it for you. Do your research. Understand their strategies. And keep in mind that no matter how good a fund manager is, they don’t get it right every time.

Cross-Chain Is Always The Answer

The emergence of cross-chain farming, enabled by aggregators, with AutoFarm and Beefy Finance leading the charge, creates fertile ground. It also introduces new risks.

Bridges, which let you move assets across blockchains, are well known as the most hacked type of software. They’re a huge Achilles heel within the DeFi ecosystem. Every time you bridge assets, you’re simply introducing more complexity and another point of failure.

Assess the risk-reward ratio thoroughly before diving into cross-chain farming. In fact, the increased yields may not even justify the increased risk.

Liquidity Mining Is Free Money

Liquidity mining, in which you’re rewarded with tokens issued by the protocol for supplying liquidity, can be quite profitable. But it's not "free money."

The value of those tokens can drop at lightning speed – particularly if the project is nascent or doesn’t quickly establish utility. And before you know it, you’ve been rewarded with hundreds of thousands of tokens that are now essentially worthless. This has certainly been the case for PancakeSwap on the BNB Chain. And the amount of projects there is so intimidating!

Imagine it like getting granted stock options in a startup. They could be worth millions one day, sure, but they are just as likely to be completely valueless.

I Can Get Rich Quick

This is the biggest myth of all. DeFi yield farming isn’t a get rich quick scheme. It’s a little-known, high-stakes, complicated activity that demands expertise, talent — and a strong sense of self-preservation.

The DeFi space is constantly evolving. What works today might not work tomorrow. You have to be tuned in, ready to pivot on a dime with market forces, and willing to get your ass kicked financially.

Only invest what you are prepared to lose. Start small. Learn the ropes. And remember, patience is a virtue. Whether you’re in DeFi or TradFi, building wealth takes time. Projects on these platforms — Curve, Aave, Uniswap, Balancer and PancakeSwap — are just the beginning. Get comfortable enough to dive into both Yearn and Beefy to help turbocharge your return.

This isn't financial advice. I'm just a columnist sharing my opinion. Do your own research. Consult a financial advisor. And be careful out there. The DeFi ocean is full of sharks.