Liquidity mining is when a protocol pays extra token rewards to people who deposit liquidity — bootstrapping its markets by printing ownership to early providers. It launched DeFi Summer: deposit stablecoins, earn trading fees *plus* a stream of governance tokens. Why it matters Liquidity mining works brilliantly to bootstrap — and terribly as a permanent model, since rewards paid in the protocol's own inflating token dilute toward zero. When evaluating any "high APY farm," separate the sustainable fee yield from the mercenary mining emissions. Related terms liquidity · yield farming · token
Liquidity mining is when a protocol pays extra token rewards to people who deposit liquidity — bootstrapping its markets by printing ownership to early providers. It launched DeFi Summer: deposit stablecoins, earn trading fees *plus* a stream of governance tokens.
Why it matters
Liquidity mining works brilliantly to bootstrap — and terribly as a permanent model, since rewards paid in the protocol’s own inflating token dilute toward zero. When evaluating any “high APY farm,” separate the sustainable fee yield from the mercenary mining emissions.