Liquidity mining (or yield farming) is a key feature of DeFi that allows people to deposit (or “stake”) one cryptocurrency or token on a Decentralized Exchange (DEX) or dApp for rewards. It was popularized by DEXs like Uniswap and Compound.

Trading is done through token swapping within a liquidity pool. Every time a user trades, user will pay a certain fee. Automatic Market Maker (AMM) collects fees and grants them to Liquidity Providers as rewards.