Liquidity mining is a new way for users to earn rewards by providing liquidity to decentralized exchanges (DEX). Instead of trading on a DEX just for profit, a user will now earn additional rewards simply by adding assets to her DEX’s liquidity pool. This not only helps increase the liquidity of the DEX, but also allows users to earn passive income simply by holding assets on the platform. Can anyone explain how liquidity mining works better and how it works in comparison to traditional trading and investing?
By my understanding traditional trading and investing often involves buying assets with the intention of selling them later at a higher price. Liquidity mining allows you to earn rewards simply by holding and trading assets on the DEX. Basically, you get paid for providing liquidity to the platform. This helps make it more attractive to other users.
To participate in liquidity mining, assets must be deposited into the DEX’s liquidity pool. The more assets you contribute to the pool, the more rewards you’ll be making.
One of the advantages of yield farming is that it can provide a more passive way to earn income from assets. Like AmberW & Chai mentioned you are rewarded.