Glossary
Liquidity Mining
Distributing a protocol's tokens to users who supply liquidity, lend, or trade — a launch tactic that briefly defined the 2020 "DeFi Summer".
Liquidity mining hands out a protocol's native token to addresses that perform some action: deposit into a pool, take out a loan, trade on the DEX. Compound's COMP distribution in June 2020 kicked off "DeFi Summer" by demonstrating how quickly mining could bootstrap TVL.
The pattern works as a customer-acquisition cost paid in token inflation rather than cash. It also distorts metrics: TVL recruited by emissions tends to leave when the emissions stop, so post-mining retention is the real test of a protocol's product–market fit.