Fee-based Liquidity Mining

In a concentrated liquidity protocol, only positions with active price ranges contribute liquidity to transactions, thereby generating transaction fees. The fee performance of a liquidity position directly reflects its effectiveness and value to the protocol. For this reason, one of Dexlyn’s unique features is that its liquidity mining rewards are distributed based on actual fee performance rather than the absolute amount of liquidity provided. This design encourages more active participation from liquidity providers who seek to maximize both their fee earnings and mining rewards.

Since mining rewards are released linearly, each time a new transaction occurs, the smart contract calculates the share of fees generated by every position relative to the total fees generated in the pool since the previous calculation. The newly released rewards are then distributed proportionally, according to each position’s fee contribution.

This fee-driven reward mechanism prevents dilution by inactive LPs or those who intentionally place liquidity in unproductive ranges solely to claim incentives. As a result, it significantly reduces the cost of incentivizing liquidity for both the protocol and external project owners, while making Dexlyn’s TVL far more efficient compared to other DEXes.