What is debt farming?

Debt farming, often referred to as "debt farming" in the context of decentralized finance (DeFi), involves utilizing borrowed funds to invest in yield-generating assets. Investors take out loans, typically using their existing crypto holdings as collateral, and then deploy that capital into high-yield projects, aiming to earn greater returns than the cost of the debt. This strategy can amplify profits but also increases risk, as fluctuations in asset values or interest rates can lead to significant losses. Essentially, it's a speculative investment approach that leverages debt to enhance potential gains.