TL;DR

• Protocols reward users with their native token
• Users earn fees and tokens by providing liquidity

Table of contents

• What is yield farming?
• What is MasterChef (V1, V2 and MiniChef)?
• How to use MasterChef?

What is yield farming?

Yield farming involves lending or staking your cryptocurrency coins or tokens to get rewards in the form of transaction fees or interest (Protocol’s native token). This is somewhat similar to earning interest from a bank account. DeFi protocols do this to attract more liquidity to the protocol.

What is MasterChef?

MasterChef is a smart contract that distributes SUSHI rewards to users staking their tokens. To compete with other AMMs - Sushi needs liquidity. In order to attract more liquidity, Sushi gives out incentives ($SUSHI) to users who add and stake their liquidity (Sushi LP) tokens.

Sushi also has KMP tokens, which are given to a user as an IOU when they lend on Kashi to bootstrap liquidity.

By staking their SLP or KMP tokens, users will earn fees from swaps or lending and extra SUSHI incentives (double rewards). 🍣💵

There are three different types of implementations for Masterchef

• MasterChefv1: The main contract on the Ethereum network that rewards $SUSHI to users for staking their LP and/or KMP tokens.
• MasterChefv2: Secondary contract on the Ethereum network. It is built on top of MasterChefv1 and gives 2 different type of tokens as a reward. e.g Users will receive SUSHI & another token as their staking reward.
• MiniChef: This contract is mainly deployed on various EVM compatible chains (AVAX, FTM, CELO etc.). It is similar to MasterChefv2, in which it also gives 2 different type of tokens as a reward.