What is Liquidity Mining?

Learn about liquidity mining and provide to earn some DFX rewards!
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.