What is Liquidity Mining in Cryptocurrencies

What is Liquidity Mining in Cryptocurrencies

In Cryptocurrencies the term liquidity mining, also known as yield farming, is the act of providing liquidity via cryptocurrencies to decentralized exchanges (DEXs). 

Since the primary goal of an exchange is to be liquid, DEXs seek to reward users willing to bring capital to their platform

The term yield farming is; a strategy that seeks to generate profits by making investments in various platforms taking advantage of different market variables.

The term "Liquidity mining" it comes because it is the injection of liquidity. This injection of liquidity by investors allows them to "mine governance tokens" that are delivered to those who participate in the system. It is, let's say, the mining mechanism of that platform, and it is again closely related to the concept of staking.

In terms of cryptocurrency, liquidity is the ability of a coin to be easily converted into cash or other coins. Liquidity is important for all tradable assets including cryptocurrencies.

Objectives of Liquidity Mining in Crypto

👉It is a way to encourage investment and injection of liquidity within the platform.

👉Token distribution among your investors, making these better their positions and profits on the platform.

👉Generate an anchor and catch value. Where, taking into account that these tokens have no value, liquidity mining creates an “entry-exit” relationship associated with an investment given by a liquidity provider.

👉It is a great incentive and attraction for investors.

👉The growth of the platform drives profits. Liquidity mining platforms can, in a very short time, multiply the investments that are made within the platform.