What Is Liquidity mining?

Liquidity mining is a process where AMM liquidity providers for a token are subsidised from a token treasury.

Effectively, you are paying people to create liquidity in an AMM trading pair or an order book.

This is to bootstrap the liquidity from zero to meaningful level, so that users and traders can enter and exit positions without significant price impact. The liquidity mining program assumes that after a certain liquidity level is artificially bootstrapped, it can maintain itself better as it has attracted active traders with larger capital pools who now have started to trade the token.

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