Liquidity mining, also known as yield farming, involves providing liquidity to a Decentralized Exchange (DEX) by participating in liquidity pools (LPs). Users are rewarded with tokens, often the native or governance token of the protocol, for their participation. In the case of DFX, these tokens can be locked and used for voting (veDFX) and contributing to the protocol's future.
This practice is vital as it boosts liquidity, facilitating trades between various token pairs. By offering incentives, liquidity mining encourages users to contribute liquidity, thereby enabling smoother trading experiences. Most liquidity pools involve trading pairs where users can deposit two different cryptocurrencies.
How to participate:
If you would like to participate, simply follow this two-step process:
Supply liquidity to any of the liquidity pools on DFX.
- Click the "Add Liquidity" button next to the LP you provided to and click 'Stake LPTs'
If you provide liquidity without staking the LPTs, you'll still receive 0.05% of every transaction based on your percentage in the liquidity pool. Upon withdrawing your liquidity, it will be returned to you in the same ratio as you initially deposited.
Current LP Incentives
Locking up your DFX earns you veDFX, a non-transferrable governance token.
With veDFX, you can vote on emissions for your preferred LPs on DFX, influencing emission rates and making governance proposals.
The above image illustrates using veDFX to vote on emission rates for various liquidity pools (gauges).
Emission rates change every Wednesday at 7 PM EST / 12 AM UTC following the expiration of the latest EPOCH.