What is the Difference Between Yield Farming and Liquidity Mining?

Technically, Liquidity Mining is an advanced version of Yield Farming

Crypto tokens or Altcoins, as we all know, are tradable, and they have a value associated with them based on supply & demand and sometimes speculations.

Before we go into these new jargons of investing, we need to understand the platform from where they originate — the DeFi space.

DeFi is a generic term used for financial applications that run on the internet in peer-to-peer blockchain networks. Previously it was called Open Finance. These are different from the latest fintech companies that run on the internet but without the blockchain part. Examples are Robinhood, Wealthfront, Titan, etc. The most important component of a DeFi application is one or more smart contracts that run without the intervention of humans and in a decentralized fashion following some consensus protocol. Unlike traditional financial applications, where you log in with your credentials, DeFi applications require the user to connect to the application using a digital identity called a wallet address or your public address in the blockchain network. DeFi applications transact with crypto assets while the regular fintech applications perform transactions with government-regulated fiat currencies and security assets. Overall, DeFi applications provide a brand new financial experience to end-users that is more open and not tied to Central banks or local jurisdictions while being riskier. Some general examples of DeFi applications are decentralized exchanges — DEXs, stablecoins, lending markets, etc. Popular DeFi apps are Uniswap, Aave, Compound, etc.

The Ethereum platform remains the biggest home of DeFi apps. The reason is its smart contract capability and the first-mover advantage. Ether is one of the earlier crypto tokens that has appreciated like Bitcoin. So holding to these tokens in some wallets or exchanges soon became a form of investment. When DeFi applications like Stablecoins and Lending Apps started becoming popular, they all faced the Liquidity problem. Liquidity is nothing but the number of tokens worth the total value of crypto assets…

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