What is liquidity mining?

The craze that DeFi brought in was a completely new means of earning passive income, redefining the old-fashioned idea of ​​mining. Liquidity mining, also known as yield agriculture, represents a new form of new cryptocurrencies by providing liquidity to decentralized exchanges. However, what is liquidity mining, and how do users, platforms, and industry-wide revenue do it?

A percentage associated with a current community, including newcomers, have not participated in the DeFi gold rush and are still unaware of the benefits. Consequently, users frequently wonder what liquidity mining means and why it is such a good deal.

After all, the payoff of the new system resulted in the decentralized financial market growing ten times in value in just four months. To provide an effortless and understandable overview and to help you understand why liquidity mining gained so much traction, we have chosen to explain that this may not be such a complex concept.

The History Of Liquidity Mining.

Liquidity mining is older than the age of the community. One of the largest decentralized exchanges before DeFi, IDEX, introduced liquidity withdrawal on October 1, 2017. Two years later, Synthetix’s derivatives liquidity protocol redefined liquidity withdrawal to Oracle’s decentralized provider. Chainlink. Finally, new decentralized exchanges, such as Uniswap and Liquidity Compound that became popular in 2020.

This had an impact that is radical for the DeFi sector, changing it forever. June focused on DeFi Pulse data, and the industry harbored $ 1.05 billion in guaranteed assets from inception. In September, the city had launched the market, leading to a 10-fold increase in locked assets. The development ended up being considered remarkable, reminding users of the ICO rumor in 2017.

However, what exactly is liquidity mining? Exactly how does it work, and how can users make money by providing liquidity to decentralized exchanges?

Liquidity mining explained

Liquidity mining, also known as yield farming, could provide liquidity through cryptocurrencies to decentralized DEX exchanges. Since the main goal would be to be liquid, DEXs seek to reward users willing to generate money for their platform.