Tokemak: liquidity rental-as-a-service

The craze of liquidity mining initiated in 2020’s “DeFi summer” kickstarted the endless opportunities in decentralized finance (DeFi). While liquidity mining has proven its effectiveness in bootstrapping short-term liquidity, its sustainability remains questionable.

Liquidity mining usually features the issuance of abundant, if not excessive, inflationary token rewards for incentivizing certain liquidity provisioning activities. Case studies conducted by Nansen, a blockchain analytics platform, and Alex Kroeger, former protocol specialist at a16z, have demonstrated that most liquidity providers (LPs) are mercenary and myopic.