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Yield Farming

What is Yield Farming?

Yield Farming is an initiative used by protocols in DeFi to incentivize liquidity and utilization by rewarding users in governance tokens (such as MIN). The idea is to acquire users by giving them ownership of the protocol itself, in accordance with the ethos of decentralized protocols that are wholly owned by their users.
In Minswap, this translates to distributing MIN token rewards to users who Provide Liquidity on our DEX and stake their Liquidity Provider Tokens (LP Tokens or LPTs). Staking LPTs will earn you MIN rewards in proportion to how much the share the LPTs you are staking is compared to the total LPTs staked in the particular farm. Minswap will aim to have an effective system for farming yield, while also offering the best user experience.

How does Yield Farming work on Minswap

1) Firstly, anyone who Provides Liquidity in any pair on the DEX will receive LP Tokens (LPTs).
2) If the pair you have provided has a farm (a list of starting eligible farms is in the subsection Farms Allocation & Governance), these LPTs can then be staked and start earning MIN tokens from that moment on.
3) Once you have staked your LPTs in a farm, you can withdraw your accrued MIN rewards at any time. Rewards will be calculated based on the second unit (so, every second), which means you won’t need to wait a fixed period of time to collect the MIN tokens you have earned. So, you can harvest any time that you have accrued rewards! But, we do advise against harvesting rewards too often, as you will incur Cardano network fees (from ≈0.6 to ≈1.2 ADA) every time you do it!
4) If you add additional LPTs to a farm, the rewards accumulated since your last action (deposit or withdrawal) will be automatically calculated and sent to you. Then, you will start earning new rewards based on the new LP Token amount.
5) If you want to withdraw a partial amount of LPTs from a farm, the rewards accumulated since your last deposit or withdrawal action will be automatically calculated and sent to you. Then, you will start earning new rewards based on the new LPTs amount. If you withdraw all the LPTs staked in a farm, you will also automatically withdraw and receive all the MIN accrued until that point.
Any deposit or withdrawal transaction will automatically create a pending Harvest UTxO which attaches a 2 ADA fee and approximately 1.5 ADA will be returned along with the harvested MIN rewards. It looks like receiving an airdrop on DripDropz, where you send 3 ADA or 5 ADA to redeem rewards and get about 1.5 ADA back.
Please note, when we refer to “staking” it refers to sending the LPTs to the Yield Farming Smart Contract to accrue MIN rewards, it is completely different to the staking of ADA. It is non-custodial as the LPTs are sent to and locked in the Staking Contract and only their owner can withdraw them.