In recent years, the cryptocurrency landscape has significantly shifted, with a key focus now on decentralized finance, also known as DeFi. Let's delve into this in more detail:

DeFi essentially involves decentralized applications, built primarily on blockchain networks such as Ethereum, that operate independently without any centralized authority.

These DeFi projects utilize open-source software and provide users with a comprehensive array of financial services and products, much akin to traditional financial systems.

In essence, DeFi presents financial services anchored on smart contracts, which function atop programmable blockchains.

It's within this context that yield farming has gained prominence. Yield farming is an investment approach wherein users, known as liquidity providers, lend liquidity to DeFi platforms in exchange for tokens. Although this strategy can be highly profitable, it also carries considerable risk, which we will discuss further.

But, how does yield farming operate? Simply put, farming refers to the act of earning tokens as rewards for supplying liquidity to a project by depositing a specific pair of tokens into a pool. Nowadays, more complex pools exist, comprising multiple token pairs.

Liquidity pools act as repositories of tokens that facilitate the trading of a specific currency pair by garnering liquidity from users. These users, in return, receive rewards from the project based on their proportional contribution or stake.

When it comes to cryptocurrency, Decentralized Exchanges (DEXs) are the platforms that facilitate buying or selling of cryptocurrencies, while liquidity pools act as the smart contracts on these exchanges. A smart contract distributes a predetermined quantity of tokens to yield farmers, relative to their investment stake. Having understood the workings within crypto markets, it will now be easier to draw parallels with Non-Fungible Tokens (NFTs).