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[Essentials for Beginners] Quick-fire Questions Related to Gate.io Liquidity Mining
Updated at:28 days 0 hours ago
Q: What is Liquidity Mining?

A: Each market that supports AMM is equipped with a corresponding liquidity pool. Users who inject funds into the pool automatically turn out to be liquidity providers and indirectly become market makers while receiving commission dividends for their trades, which is called Liquidity Mining.

Q: What is Automated Market Maker(AMM)?

A: The automated market-making bot determines the swap price based on the ratio of the two tokens in the pool, and the trader will place an order at the price determined by the . The use of algorithmic bots to simulate trading behavior in the market and provide liquidity to the market is known as AMM(Automated Market Maker). Gate.io's AMM calculates transaction prices based on the Constant Product Market Maker Model (x*y=k) and thus provides continuous quotes for the market.

Q: What will Liquidity Mining bring to LP and Traders?

A: For LP, participating in liquidity mining means the ability to gain returns at very low risks with their idle assets. While for traders, the waiting time for transactions is greatly reduced, and the larger the liquidity mining pool, the smaller the slippage in the trade.

Q: Are There Any Requirements for Adding Liquidity?

A: The amount to be added can’t be below 100 USDT to be considered a valid transaction parameter.

Q: Are There Any Requirements for Removing Liquidity?

A: If the same trading pair is successfully added, it takes one hour before it can be redeemed.

Q: What Benefits Can I Get from Participating in Gate.io Liquidity Mining?

A: Gate.io will open liquidity mining pools in different currencies and set up reward pools according to currency requirements. In addition to regular trading fees, users who participate in the reward pool can also receive additional rewards.

Q: Where Do the Earnings Come From?

A: The platform will pay corresponding rewards as liquidity providers’ earnings. Also, the DEX platform pays transaction fees to them, and meanwhile, they will receive the loan interest paid by the mortgage lending platform. Participating in Liquidity Mining at Gate.io, users will obtain additional rewards from the platform in addition to the revenue from the corresponding trading fee.

Q: What Are the Risks to Me in Providing Liquidity?

A: There is a risk of incurring an impermanent loss, which is the most common and usually unavoidable loss in liquidity mining. In general, the revenue share provided by the platform to the liquidity provider usually exceeds the impermanent loss to a substantial level. In addition, DeFi liquidity mining entails the security risk of the DeFi project, while users participating in liquidity mining at Gate.io don’t have to worry about the security issues.

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