How to Liquidity Mine ETH on Yearn Finance: Step-by-Step Guide

What Is ETH Liquidity Mining on Yearn Finance?

Liquidity mining with ETH on Yearn Finance lets you earn passive income by depositing Ethereum-based assets into automated yield-generating vaults. Unlike traditional staking, Yearn’s liquidity mining combines your ETH with other tokens (like stablecoins) to provide liquidity to DeFi protocols, then automatically compounds rewards for maximum returns. This guide breaks down the entire process for beginners.

Prerequisites Before You Start

• Ethereum Wallet: MetaMask or WalletConnect-compatible wallet
• ETH for Gas Fees: At least 0.05 ETH for transactions
• Base Assets: ETH plus paired tokens (e.g., stablecoins like DAI or USDC)
• Web3 Knowledge: Basic understanding of DeFi risks

Step-by-Step: Liquidity Mine ETH on Yearn

1. Connect Your Wallet

   Visit Yearn Finance and click “Connect Wallet” in the top-right. Select your wallet provider and approve the connection.

2. Choose a Liquidity Pool

   Navigate to “Vaults” and select an ETH-based pool like:

   • ETH/Stablecoin pools (e.g., Curve’s stETH-ETH)
   • Yearn’s yETH vault (auto-compounds Lido staking rewards)

   Check APY rates and risks before proceeding.

3. Provide Liquidity to a DEX

   If using paired assets (e.g., ETH + DAI):

   1. Go to a DEX like Curve or Balancer
   2. Deposit equal values of ETH and the paired token
   3. Receive LP tokens representing your share

   For single-asset ETH vaults (e.g., yETH), skip to Step 4.

4. Deposit into Yearn Vault

   Back on Yearn, select your target vault. Click “Deposit,” enter the LP token amount (or ETH amount for single-asset vaults), and confirm the transaction. Pay gas fees when prompted.

5. Monitor and Compound Rewards

   Yearn automatically:

   • Harvests trading fees/yield from underlying protocols
   • Converts rewards into more vault tokens
   • Reinvests for compound growth

   Track earnings via your wallet or Yearn’s dashboard.

6. Withdraw Funds

   Click “Withdraw” on your vault, specify the amount, and approve two transactions: one to exit the vault, another to remove liquidity (if using LP tokens).

Key Benefits of Yearn ETH Liquidity Mining

• Auto-Compounding: Rewards reinvest hourly without manual effort
• Gas Optimization: Batched transactions reduce fees
• Risk Diversification: Vaults spread assets across protocols
• Higher APY: Combines base yield + liquidity incentives

Risks to Consider

• Impermanent Loss: ETH price volatility affects paired assets
• Smart Contract Vulnerabilities: Audited but not risk-free
• APY Fluctuations: Returns vary with market conditions
• Gas Costs: High during network congestion

Frequently Asked Questions (FAQ)

How much ETH do I need to start liquidity mining?

No minimum, but consider gas fees (0.03–0.2 ETH). For paired pools, you’ll need equivalent value of another token (e.g., $500 ETH + $500 USDC).

Can I use staked ETH (stETH) with Yearn?

Yes! Yearn’s yETH vault accepts stETH, letting you earn Lido staking rewards + additional yield strategies.

How often are rewards paid?

Rewards compound continuously—typically hourly—but appear as increased vault token value rather than separate payments.

Are there withdrawal fees?

Yearn charges a 0.5–2% performance fee on profits only, deducted upon withdrawal. No deposit fees.

Is liquidity mining safer than staking?

Not necessarily. While staking has slashing risks, liquidity mining adds impermanent loss and protocol risks. Diversify and never invest more than you can lose.

Can I track my APY in real-time?

Use Yearn’s dashboard or third-party tools like Zapper.fi to monitor vault performance and earnings.