For Customers Log in
Contact Us

Liquidity Mining Meaning

A strategy used by decentralized protocols to attract liquidity. The protocol rewards users who "provide" their tokens to a liquidity pool with newly minted governance tokens.

It is effectively "Yield Farming" for the protocol’s own benefit. This was the primary driver of the "DeFi Summer" of 2020.

Projects like Compound and Uniswap gave away millions of dollars in tokens to anyone willing to lend or provide liquidity. This created a "Cold Start" solution-it gave people a reason to use a new, empty protocol.

While highly effective for growth, liquidity mining can lead to "Mercenary Capital." If the rewards drop, these users (the "farmers") will immediately withdraw their money and move to the next protocol with higher yields. Therefore, the long-term success of a protocol depends on its ability to turn these temporary users into permanent participants.

← Back to Glossary

Explore our services
Providing liquidity in the cryptocurrency market?
Authorize on our platform and do it smarter with FM Pulse.
pic

FM Marketplace

A reliable and high-performance crypto liquidity marketplace for institutions and businesses.

Learn more
pic

FM White Label

Launch your fully branded B2B crypto trading platform in under one week.

Learn more
pic

FM Liquidity Match

Crypto OTC-as-a-Service infrastructure for enhanced monetization and trade control.

Learn more

Scale your business, leave the hard work of your trading needs to us

Reduce your integration costs and operational risk across multiple access points with our platform

Get started