STRATEGIES
Liquidity Mining
Definition
Liquidity mining is a mechanism where users provide liquidity to a protocol in exchange for token rewards. It's used by protocols to bootstrap liquidity and distribute governance tokens to users. It is a distribution mechanism for the governance token of a protocol.
Example
Example
Compound distributes COMP tokens to users who supply assets to their lending pools, incentivizing liquidity provision.
Risks to Consider
Risks
- Token price volatility
- Smart contract risk
- Program changes
Common Questions
How long do liquidity mining programs last?
Programs vary widely, from weeks to years. Many protocols adjust rewards based on protocol needs and governance decisions.
