Farming
In the context of AMM DEX, farming refers to a process where users provide liquidity to a pool and, in return, receive rewards usually in the form of governance token of the DEX. Although it is the same as swap fee (trading fee) in that it is the profit of the pool investors, farming reward is a basic reward provided by the DEX to attract pool investors, so it is given to users regardless of the actual swap frequency. The amount of rewards that users can earn depends on several factors, including the farming plan of the DEX, the size of the liquidity pool, the duration of the farming period. As previously mentioned, farming rewards in AMM DEXs are typically the governance token of the DEX. However, there are instances where other tokens are added to create synergies with external protocols. In these cases, the external protocol may specify their preferred trading token markets, liquidity providing range, and type of reward token they wish to offer in order to ensure the best possible outcome. In this way, users can benefit from both the farming rewards and the external tokens, making it a worthwhile endeavor for those interested in participating in the AMM DEXs.
Last modified 1mo ago