Liquidity Mining

Liquidity mining, often referred to as yield farming, is a mechanism where liquidity providers earn token rewards in return for the liquidity they offer to the platform. Liquidity mining serves to create an additional revenue stream for liquidity providers, offsetting the potential for impermanent loss (IL). Furthermore, implementing liquidity mining also helps nascent platforms bootstrap initial liquidity, which attracts traders with less slippage. Onboarding more traders is essential as it leads to higher swap fees that are distributed to liquidity providers, generating higher returns on their deposits.

Liquidity providers may engage in liquidity mining by staking their positions in a dedicated liquidity staking pool. It is important to note that a position can earn swap fees and staking rewards while it is active, meaning that the current price of the pool is within its price range.

GnoSwap distributes liquidity staking rewards with Warm-up Periods, a reward distribution mechanism that applies a dynamic multiplier to each staked position based on its total duration staked in range. This mechanism is designed to encourage long-term liquidity provision while offering flexibility for those who often need to adjust their price range to remain active due to liquidity concentration.

GnoSwap offers two types of liquidity mining incentives for its liquidity staking pools:

1) $GNS Incentives

GnoSwap distributes newly minted $GNS tokens to incentivized pools on a per-block basis, with further details available in the Emission section. During the initial launch, the GnoSwap Governance will select these incentivized pools from among the pools that hold tokens essential to the GnoSwap platform.

2) External Incentives

GnoSwap enables third-party projects to inject tokens as rewards to liquidity staking pools to incentivize liquidity providers. The incentive provider must specify the type of the token, its quantity, and a period for the staking contract to automatically distribute rewards to position stakers in a pool selected by the incentive provider.

GnoSwap offers this functionality to help new, low-capital projects that lack credibility or reputation become an incentivized pool to bootstrap liquidity for growth.