Today, they are launching the Liquidity Network protocol — a new type of decentralized exchange that adds an additional reward for liquidity creators and traders. The protocol will be deployed at the Ethereum blockchain and will be available for anyone to build on.

The team's mission is to create a financial system that is fair, open and accessible to everyone. Existing DEXs typically rely on fees as their only source of revenue. Support for adoption is limited because the financial gain to trade is usually not worth it for the trader. The Liquidity Network changes all that. Traders can now use a DEX and earn rewards by providing liquidity directly from the protocol. Plus, smart contract functionality ensures that funds are always safe and secure. As more Liquidity Nodes join the network, more is being paid out to all users of the protocol, creating an incentive to join early.

Liquidity Mining is an additional reward that a DEX or DEFi protocol use to attract more Liquidity. For example, when you add liquidity to a Liquidity pool, in addition to a portion of fees generated, a DEX will usually pay you an additional reward. This is similar to mining for Bitcoin or Ethereum where miners are rewarded for their work with the asset of choice.

Making liquidity mining easier

Liquidity mining is important because it gives users and any participant in the ecosystem a reason to hold the token instead of just trading it. The reason is because if the user holds the token of a certain protocol, they can lend their money to others through that protocol and be rewarded. When the protocol is well used, this rewards will be greater than the money you invested originally by providing community incentives (e.g. payment channels).

Liquidity should be shared. This is the year we see a new evolution of the liquidity mining model, with projects like CryptoIndex and B2BX coming online.

For those not familiar with mining, mining is the process of adding transaction records to Bitcoin's public ledger of past transactions. The blockchain is maintained by the "miners" who are rewarded with a certain amount of bitcoin for each block they process.

Current models reward miners based on their hashrate, which can mean that larger pools have an inherent advantage in securing a block. A protocol’s community should have an equal opportunity to claim the rewards, regardless of size. This is why we think it’s important to share liquidity reward equally among all Liquidity token holders. Liquidity Mining allows for this to occur and has been proven a successful model, as seen with projects like 0x, Aragon and OmiseGO.

This new evolution of the Liquidity Mining rewards will continue to help grow and maintain a healthy open order book on DEX platforms, ensuring that tokens get to market faster and more efficiently.

In addition, having Liquidity mined on DEX platforms will also help minimize price manipulation of market makers on these exchanges. It’s a win-win for everyone involved in our ecosystem and will help spur the adoption of DEX platforms by traders who require deeper markets than centralized exchanges currently provide.

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