From CryptoWiki

"Liquidity is a word that is notoriously (ab)used in the decentralized finance ecosystem. The classic definition of liquidity goes as follows: liquidity is the degree to which an asset can be easily converted into cash in the market. A liquid asset can be converted at short notice without incurring significant discounts because there is a reasonable degree of buying and selling volume."

  • DEX's who are trying to gain more traction need liquidity of the tokens on their platform to attract users with good prices. Liquidity Mining has been one example of trying to attract liquidity and users towards their project. People who participate in this kind of mining are often called LPs and sometimes yield farmers.