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Beyond Trading Fees, What Other Incentives Might a DeFi Protocol Offer to Mitigate Impermanent Loss?

Protocols offer native governance tokens as "liquidity mining" rewards to increase LP returns and offset impermanent loss.
Greeks.Live31.10.25

Beyond Trading Fees, What Other Incentives Might a DeFi Protocol Offer to Mitigate Impermanent Loss?

DeFi protocols often offer "yield farming" incentives to mitigate impermanent loss. These typically involve distributing the protocol's native governance token to liquidity providers in addition to the standard trading fees.

This additional yield, often referred to as "liquidity mining rewards," is designed to boost the LP's overall return, compensating for potential IL and attracting deeper liquidity to the pool.

How Do Yield Farming and Staking Differ in the DeFi Ecosystem?
What Are the Mechanisms for Distributing Governance Tokens to Align Community Incentives?
Explain the Concept of ‘Yield Farming’ in DeFi
How Does a Protocol’s Treasury Fund Staking Rewards?

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