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Author: Admin | 2025-04-28
Crazy rewards, they convince investors to supply ETH to the pool. Sometime later, they would steal all ETH and leave the investors with a bunch of tokens that cost nothing.2. Volatility issuesHigh exposure of liquidity providers to the risk of impermanent loss.The latter means that the liquidity provider will get less dollar value of their liquidity at the time of withdrawal than at the time of deposit.3. Mercenary nature of capital supplied to liquidity pools.In simple words, this means that liquidity providers can at any time withdraw their liquidity and dry the pool because they found another protocol with higher yields.It also means that if a protocol keeps rewarding liquidity miners with a large number of its own tokens, the value of its tokens will surely be diluted.Furthermore, when liquidity miners leave a protocol, often they would immediately sell the earned tokens and therefore dump their price down.All these factors dramatically destabilize the whole DeFi sector.This is why many projects now work towards figuring out new mechanisms that would help make liquidity mining more balanced and valuable for the future development of DeFi.Liquidity mining — Yellow Network approachBefore diving into the new liquidity mining concept suggested by Yellow Network, here are a few words about Yellow’s overall approach to crypto liquidity and trading.A few key moments here:Yellow believes there must be a unified global trading market for crypto. Market participants shall have one-gate access to all existing crypto liquidity. Also, they should be able to execute global strategies across multiple
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