Liquidity mining may become a new road

On the basis of traditional mining, various types of mining methods emerging in the crypto market are gradually being upgraded. Since 2021, the mining of liquidity has earned enough attention from all walks of life. The logic of DeFi liquidity mining is easy to understand, because users participating in liquidity mining are essentially the same as depositing money in the bank to generate interest or participating in P2P.

Liquid leveraged mining is slightly different. In leveraged liquidity mining, users can borrow tokens to increase their mining position, thereby gaining additional mining liquidity. While using leverage can lead to greater profits, it also comes with greater risk. Specifically, one of the biggest concerns users have when using leverage is liquidation risk.

However, from 2021 to the present, the drawbacks of liquidity mining have gradually emerged. The incentive model in DeFi 1.0 is more to attract and encourage the short-term participation of liquidity miners. It does not form a sticky symbiotic relationship with the protocol, but constantly “digs, sells, and raises” and joins the higher-yielding protocol. In this context, some people have proposed the concept of DeFi 2.0, planning to solve the problems encountered by these DeFi protocols through new mechanisms. At present, a number of highly innovative projects have appeared on the market, such as Crypto Speed Race, Timeless, etc.

Leveraged liquidity mining can allow users to generate high returns when holding short or even market neutral positions. This means that leveraged liquidity mining can allow you to profit in a bear market.

In addition, in other liquidity mining platforms, users usually have to maintain that the income is greater than the expenditure in all receipts and payments in order to provide liquidity mining. It also means that in a bear market, when prices drop, the gains may not offset the losses from holding the token. Leveraged liquidity mining platforms are one solution to this problem and could become one of the few DeFi safe havens that remain profitable during a bear market.

The intensification of the downward trend in the crypto market began at the end of November last year. In addition, BTC’s hash rate has also reached near-record levels, and these pressures on miners’ profit margins, perhaps other mining methods can give miners more options in a volatile market.