Liquidity mining is a way for crypto holders to earn passive income by providing tokens to decentralized exchanges (DEXs). These tokens are added to liquidity pools, which help traders swap assets. In return, liquidity providers earn a share of trading fees and sometimes extra rewards in the form of the platform’s native token.
This system supports the smooth operation of DEXs, which rely on user-supplied liquidity to function. It’s one of the most popular earning strategies in DeFi, but it’s not without risks. Price swings, smart contract bugs, and “impermanent loss” can affect your returns. Still, for many, it’s a powerful way to put idle crypto to work.
