In the Chinese context, the two terms yield farming and liquidity mining are This concept is often collectively referred to as "liquidity mining". Indeed, in a broad sense, both concepts refer toearning passive income by providing liquidity toDecentralized Finance (DeFi)protocolsprocess. But there are subtle differences between them, and understanding these differences can help us grasp these two concepts more accurately.

In order to better understand them, I suggest that we introduce another basic concept, namely "Staking" mentioned in the previous chapter, for comparison and understanding. The following are the basic definitions of these three concepts:

• Staking refers to locking a native asset of a blockchain using the PoS (Proof-of-Stake) consensus mechanism within a certain period of time in order to Help maintain the operation of the blockchain and earn corresponding rewards.
• Yield farming is a way for people to earn passive income by providing liquidity, known as “crypto deposits”, to DeFi liquidity pools or staking pools. In short, users lock their assets into a DeFi protocol, and in exchange for this locking, the DeFi protocol automatically pays these “farmers” cryptocurrency rewards over a period of time.
• Liquidity mining refers to providing crypto assets to a liquidity pool and receiving fees and cryptocurrency rewards based on their proportion in the pool. It can be said that liquidity mining is a form of income farming, but liquidity mining occurs in a more segmented field - DEX (decentralized exchange) based on AMM (automatic market maker) and liquidity pool Place).

It is not difficult to see that the main differences between the three are scenario and motivation: as the core of many blockchain consensus mechanisms The staking of elements is common in various scenarios, and generally, pledgers are more likely to want to maintain the security of the network than to obtain passive income; income farming occurs in DeFi protocols, and income farming focuses on income. , that is, the pursuit of higher APY (annual percentage yield); and when this investment strategy is specific to the AMM decentralized exchange, it can also be called liquidity mining.

Of course, the relationship between the three is not a simple and complete one. The above picture is just to provide an intuitive relationship display.

If you want to know more about "yield farming" at a broad level, please refer to the chapter "What is yearn.finance".