Explore Liquidity Mining

Liquidity mining is a community-based approach to market-making and protocol governance. A token issuer or exchange can reward a pool of miners to provide liquidity for a specified token. For example, on the Compound protocol, users who deposit tokens will earn both interest and a share of the Compound governance token, COMP.

When users provide crypto assets to liquidity pools, they receive LP tokens, their pooled assets are used for daily swaps on the DEX and the fees from those transactions are collected and distributed based on the LP token amount a miner holds on his wallet address.

Majority of the time, liquidity mining is a decentralized process where you have a full control over your funds you add to the liquidity pools and you can withdraw your LP tokens anytime you want.

There are few risks when you provide liquidity mining. Most popular liquidity mining risks are:

- Impermanent loss;

- Price volatility of the assets you’ve put in the liquidity pool;

- Rug-pull or similar scam exit.

Once you convert your assets into LP tokens and deposit them into the liquidity pool, you are not able to trade them during the liquidity mining period. You will have to withdraw your LP tokens first then exchange them for the desired assets and after that you will be able to trade your assets without any limitation.

Yes! You can drastically reduce the liquidity mining fees when providing liquidity, the only way is to use Single Token Exposure, luckily, we offer Single Token Exposure to any of our ETH live pools.

Single Token Exposure is a process of providing liquidity to a pool by using one token only instead of two tokens as majority of the AMM's require. The first and the most important benefit about this technology is that you are only exposed to a risk of only one token price volatility instead of two, the second benefit is that it reduces a lot of transaction fees.

There are various ways of paying out liquidity mining rewards, the most popular one is the auto-compounding method where the rewards from every transaction fee are compounded to your wallet address. By doing this technique, some AMM's may offer higher liquidity mining rewards (APY).