How Liquidity Farming Works

Users who participate in liquidity farming are known as liquidity providers (LPs), and they donate money to liquidity pools, which are smart contracts that hold money. A marketplace where users can borrow, lend, and trade tokens is where the liquidity pool invests. A fee is charged for each transaction, and investors are compensated according to their investment in the pool.
Certain liquidity pools offer incentives in the form of numerous tokens, which can be deposited in other liquidity pools to receive rewards in turn, and so on. In the Ethereum ecosystem, there is now a lot of ERC-20 token mining that produces incentives in the form of ERC-20 tokens.
Future liquidity farmers may have the ability to transfer money frequently across several blockchains in quest of yields.

There is so much about liquidity farming and it is good we learn about it so that we can also take advantage of the opportunity to earn from liquidity farming. Check out the different platforms where you can participate in liquidity farming.