Yield Farming enables KNIGHT token holders to earn rewards by pairing up their KNIGHT with Ethereum (ETH) and locking them into our smart contract. By doing so, users provide liquidity for the KNIGHT token. Liquidity providing aids in facilitating the 24/7 Automated Market Maker for secondary trading of KNIGHT and ETH.
One way to think of Yield Farming is that Liquidity Providers act just like Currency Changers in the real world. For example, a Currency Changer who holds USD and EUROs will charge a fee for exchanging USD to EURO, vice versa. Liquidity Providers act in the same way except in this case, they hold crypto assets.
Liquidity Providers earn trading fees from the secondary exchange whenever swaps from KNIGHT to ETH, vice versa, are made. The trading fees are set at 1% per trade. On top of earning trading fees, Liquidity Providers are rewarded with KNIGHT tokens. KNIGHT rewards are distributed over time to Liquidity Providers.
KNIGHT rewards earned by Liquidity Providers will have a vesting period of 8 weeks. After the 8-week vesting period, the rewards can be claimed and transferred to the Liquidity Provider's wallet.