Liquidity Pools
The first thing you probably came across on the blockchain, and what is kind of the heart of deFi is the way to swap coins by using "Liquidity Pools". A Liquidity Pool works like a "market" place for two crypto coins, for example WETH and USDC.
This specific Liquidity Pool does not just contain the two cryptos, and let you exchange one for the other. The balance between the cryptos represent the value of one crypto towards the other.
This relationship is very important when looking at "Reward" crypto, which may have far less amount of "liquidity" backing it up. It basically tells you, the more liquidity available, the longer will the "Reward" crypto be of any value.
The time it takes to "drain" the Liquidity Pool, depends on the speed the "Reward" crypto is minted. This is also the reason why we see a always fading value in "Reward" crypto, most people who receive it will immediately exchange it for a more solid crypto like for example MATIC or USDC.
Looking at another "Reward" token, GENX, starting out with a high value, giving you high returns in the first couple of days, then quickly fading away. So the initial 700% APY quickly went down to 35%, while the crypto itself went down from $1.8 to $0.08 in 9 months. An initial investment of $20 is now worth around $7 including earnings.
The GENX / USDC Liquidity Pool contains ~ 9,169 USDC and 108,882 GENX. $193 in investment would give you 1% of the reward distributed daily for that pool. If it's worth it or not, I leave for you to decide...
Add to the risk-factor that there is always someone who "owns" the liquidity in the pools, and they may withdraw and exchange it anytime they wish.
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