Liquidity mining, also known as yield farming, is a way for network participation that allows you to provide liquidity to a liquidity pool (LP) on a Decentralized Exchange (DEX). In return, you receive a reward from that specific liquidity pool. Depending on the LP, a user may also be rewarded in a native token or governance token of the protocol. In this case, DFX, which can be locked and used for voting (veDFX) and contributions to the protocol’s future.
Liquidity mining is important because it helps create liquidity to enable the trades between different token pairings and this incentive strategy enables users to contribute liquidity in order to facilitate those trades. This means that the majority of liquidity pools are between trading pairs where users can deposit the two different cryptocurrencies depending on the pool.
If you would like to participate, simply follow this two-step process:
If you provide liquidity but don't stake the LPTs, you will still receive .05% of every transaction based off your percentage in the liquidity pool. Once you withdraw your liquidity it will be wrapped up in the ratio amount you get back.
Rewards on Ethereum are decided by veDFX gauge voters. Meaning if you lock up your DFX, you will be given a non-transferrable governance token called veDFX.
That veDFX can then be used to vote for emissions on any of your favorite LPs offered on DFX! This effectively gives the users the ability to change the emission rate and make governance proposals.
The image above is an example of using veDFX to vote for emission rates between the different gauges (Liquidity Pools). These rates will change every epoch (Wednesday, 8 PM EST).
A point system is to be implemented such that each currency can have up to a maximum of 10 points. It scales down linearly based on currency volume but the community can vote to increase/decrease it by up to 2 points per proposal if the community deems the stablecoin as high/low demand (i.e. PHP, INR, etc.). The source of the volume will be Bank for International Settlements (BIS) report. https://www.bis.org/statistics/rpfx19_fx.pdf