What is liquidity mining, and how does it work?

Bitcoin and cryptocurrencies are once again in a strong upward trend and are thus attracting attention. The reason for this is also the rapid growth in the field of decentralized finance (DeFi). Investors can generate cash flow through cryptocurrencies and FIAT currencies in various ways. Liquidity mining is one of the best-known forms.

An important factor in this context is also the emergence of new trading venues. Until now, cryptocurrencies were traded exclusively on a centralized exchange (CEX). However, smart contracts can also give rise to decentralized exchanges (DEX) that function completely automatically and autonomously.

Digitalization affects the financial sector in many aspects. Increasingly, new investment products are emerging that are organized in a decentralized manner. The complete automation of such protocols often makes them cheaper and more secure than conventional applications.

Decentralized finance (DeFi) is on the rise

In 2020, numerous projects focusing on decentralized finance (DeFi) were able to generate high price gains. One example of this is Yearn.Finance, whose token was able to rise to around 48,000 US dollars at times.

One reason for the rising demand is the high returns that are possible. Besides…