Yield-bearing assets are DeFi assets that provide some form of added gain on top of ordinary asset-holding.
By owning certain yield-bearing assets, it is possible to earn extra, compounding returns on some DeFi protocols. Most often, yield-bearing tokens can be redeemed for interest on more tokens.
By reinvesting or utilizing these assets by, say, staking or pooling, the protocols are able to incentivize people to use the contracts and receive the yield-bearing tokens as proof of those deposits. The users don’t have to “harvest” the yield because it will be auto-compounded into their position. This is a great way to earn more of an asset or its derivative without having to invest more capital.
One example of a yield-bearing asset would be the AAVE aToken. When assets are deposited with the AAVE protocol, the staker receives aTokens in their wallet that can later be redeemed for the underlying asset, plus the compounded earnings from having it staked in the contract.
Sometimes tokens go through several strategies and protocols before their final destination, so one will often see prefixes on the tokens designated for yield farming: cvxCRV, for example, is a tokenized version of veCRV, which is vote-escrowed CRV. These governance tokens are able to earn yield because voters desire them in voting pools that support their yield strategies.