Liquidity mining is the distribution of tokens to users who provide liquidity to pools or protocols, bootstrapping depth and usage.
Protocols incentivize LPs with token rewards on top of trading fees, improving depth and attracting users. Programs may be temporary, targeted, or ongoing.
"A DEX issues governance tokens to LPs of key pairs to strengthen markets during launch."
"Dual incentives combine project and partner tokens to amplify rewards."
Rewards can cause mercenary liquidity that leaves when incentives end, and emissions can dilute token value. Careful design aligns long-term participation with protocol health.
"Vesting or lockups reduce immediate sell pressure and encourage durable liquidity."
"Dynamic rewards can target pools with poor depth to improve UX across the platform."
All terms and definitions may update as the Cryptionary improves.