What is Liquidity Mining
Yield Farming vs Staking vs Liquidity Mining
- Staking locks crypto for the network to function in return of fees
- Yield farming involves lending your money in return of interest through fees (like earning interest lending money to a bank)
- Liquidity Farming is when you provide crypto to liquidity pools and in return get Native/LP tokens + Governance Tokens
- Yield Farming is a subset of staking
- While yield farming supplies liquidity to a DeFi protocol in exchange for yield, staking can refer to actions like locking up 32 ETH to become a validator node on the Ethereum 2.0 network.
- Farmers actively seek out the maximum yield on their investments, switching between pools to enhance their returns.
- Liquidity Mining is a subset of Yield Farming
- The primary difference is that liquidity providers are compensated with the platform’s own coin in addition to fee revenue.