Every swap on Uniswap, Curve, or Raydium is priced by a smart contract instead of a matching engine, and that contract is an Automated Market Maker (AMM). AMMs changed how trading works in DeFi by removing centralized order books and intermediaries, and they rely on liquidity pools to keep trading permissionless and always available.
How AMMs price trades
An AMM replaces order matching with algorithmic pricing. Users trade against a liquidity pool, a smart contract that holds a pair of tokens, and the pool sets the price from its current ratio using a formula such as the constant product (x * y = k).
Uniswap on Ethereum, Orca and Raydium on Solana, Osmosis on Cosmos, and zkSync-native protocols each implement a variation of that idea, tuned for stablecoin swaps, high-speed trading, multi-asset pools, or zero-knowledge scalability and privacy.
Liquidity pools and liquidity providers
An AMM only works if its pools hold token reserves, and those reserves come from Liquidity Providers (LPs), who deposit equal values of two tokens and earn a share of the swap fees in return.
LPs take on market risk from price movements and volatility in the pool. Providing liquidity can still be a passive way to earn yield, especially when a protocol adds token incentives or staking rewards on top of fees.
Yield farming on top of AMMs
Yield farming, also called liquidity mining, deploys capital across DeFi protocols to maximize returns, from staking LP tokens in one place to multi-step strategies that combine lending, borrowing, and cross-chain bridges.
Protocols often reward LPs with their native token to bootstrap liquidity, which can produce high yields early in a project's life and adds complexity and risk.
On Solana and Cosmos, fast blocks and low fees make finer-grained strategies practical, and zk-based platforms like zkSync and Starknet add security and privacy properties, although their tooling and adoption are still maturing.
Yield farming strategies by chain
Five strategies show how the same mechanics look on different chains:
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Stablecoin LP on Curve (Ethereum): provide liquidity to a stablecoin pool like USDC/DAI/USDT and earn trading fees plus CRV rewards, often boosted through veCRV staking.
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Raydium Fusion Pools (Solana): deposit a pair like RAY/USDC into a Fusion Pool and earn swap fees plus incentives in both RAY and a partner project's token.
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Osmosis liquidity mining (Cosmos): provide liquidity to ATOM/OSMO pools and stake the LP tokens for OSMO emissions and governance rights.
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zkSync LP incentives: add assets to native AMMs during early zkSync-era liquidity programs to earn protocol rewards and exposure to zk-native token launches.
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Lending-looped farming on Aave and Balancer (Polygon): supply stablecoins on Aave, borrow another asset, loop it into a Balancer pool, and collect rewards from both protocols.
How the pieces feed each other
AMMs need liquidity, LPs supply it in exchange for yield, and yield farming amplifies that exchange with incentives that drive user activity, capital flow, and protocol growth, which is why these systems develop dynamics of their own.
The same mechanics now run across EVM-compatible chains, high-throughput networks like Solana, interoperable hubs like Cosmos, and zk-rollups, and each ecosystem both extends DeFi and fragments its liquidity further.
Risks to price in
Impermanent loss, smart contract bugs, and rug pulls are real risks in every strategy above, so I would size any position on the assumption that one of them happens, and treat the advertised yield as compensation for carrying them.