30/06/2021
There are currently five platforms where you can participate in liquid mining, and the mining cycle and income of different platforms are different.
For example, Aave is a decentralized lending and borrowing protocol. Interest rates will be adjusted through algorithms based on current market conditions.
In return for the loaned funds, the lender gets "aTokens". These tokens begin to generate interest and create compound interest immediately after being deposited. Aave also supports other more advanced features, such as flash loans.
In order to explain Yield farming more clearly, let us look at the simplest farm yield method on Ethereum. Uniswap is an "Automatic Market Maker" (AMM)_protocol, which allows users to exchange between two different cryptocurrencies, such as KNC-ETH, SNX-DAI, etc. Liquidity providers can create a market by depositing two equivalent tokens. Uniswap charges a 0.3% fee for each exchange (transaction), which will be transferred to the liquidity providers (LPs)_.
What are liquidity providers (LPs)?
A liquidity provider is a person who provides assets (liquidity) to the "fund pool". In Uniswap, each pool is associated with a trading pair, such as KNC-ETH. The more liquidity provided to the fund pool, the smaller the slippage of the transaction, and the better the "price discovery" (here thanks to the arbitrageur). By providing liquidity to Uniswap, the return for LP is to obtain a share of expenses from the pool of funds that is proportional to the liquidity provided. This is one of the simplest and least risky forms of participation in Yield Farming on Ethereum.
After that, traders can trade with the liquidity pool. In return for providing liquidity, liquidity providers will earn commissions from transactions conducted in their capital pools.
