Liquidity Mining

Liquidity mining (also called yield farming) is when users earn tokens for providing liquidity to a DeFi protocol. This mechanism is used to offset the impermanent loss experienced by LPs.

Liquidity mining rewards create an additional incentive for LPs besides transaction fees. These rewards are particularly useful for nascent protocols. Liquidity mining helps to bootstrap initial liquidity, facilitating increased usage and more fees for LPs.

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