IMPERMANENT LOSS PROTECTION ON STON.FI

Liquidity providers are often faced with the problem of losing their assets when there is a drop in the price of the token(s) in the liquidity pool(s), this phenomenon is called "Impermanent loss". If you’ve been experiencing this problem or you are even scared of providing liquidity to pools because of this menace, well this good write up is for you. Stay with me as I explain how the impermanent loss protection initiative works on the STON/USDt liquidity pool on the STON.fi DEX to mitigate losses due to this problem. #defi

Amazingly, this is the first of its kind on the entire #DeFi space, so don't you doubt it whenever you see "STON.fi is the leading DEX". Now, let’s delve in:

How does it work?

Impermanent loss protection is a new feature on the STON.fi DEX that is designed to help users that provide liquidity to the STON/USDt pool mitigate loss due to price fluctuations of the tokens in the stated pool. It reduces the loss incurred by price fluctuation by offsetting up to 5.72% (about 50% decrease in the asset price). The total monthly budget for this feature is $10K. To be eligible for this feature, you must take the following into cognizance:

👉Only liquidities added to the STON/USDt pool during the validity period (previously December 12th-December 31st, 2024 and now extended to January 1st-January 31st, 2025) is eligible for this offset.

👉Any liquidity provided to other pools other than the stated pool (STON/USDt) or liquidity removed from the pool before the validity period will not qualify for the offset.

👉Withdrawal of liquidity by transferring LP tokens from the farming pool to another wallet will disqualify you from being eligible for the offset.

👉The budget won't exceed the stipulated amount for each validity period even if the incurred loss is greater than this budget; in this case, the payout will be proportionally calculated and offset distributed such that it won't exceed $10K.

👉Offset of 5.72% applies only when there is maximum of 50% decrease in the price of STON.

👉Maximum offset amount is pinned at $100 (in STON) per participant and this depends on the minimal amount of liquidity maintained by the participant during the validity period.

It's important to note that the payout will be made automatically within 15 days after the end of the validity period, without you having to claim with a special mechanism

💡 Full terms and conditions governing this feature including details about how it works can be found here: https://drive.google.com/file/d/1he59314Dwnwb3p9QdAqWOsZUBiHl9Tr5/view?usp=sharing

How is this beneficial to liquidity providers?

The most important benefit is that risk of losing your assets due to price fluctuations is now greatly minimised. So rest assured, you can sleep with your two eyes closed without having to bother your mind with thoughts of getting less after providing liquidity.

Another benefit is that you will learn more about Impermanent loss in case you are providing liquidity to any pool in the future. So read this with an open mind.

These resources will be very useful if you intend to DYOR on this topic (impermanent loss protection):

Guide on providing liquidity: https://guide.ston.fi/en/what-is-liquidity-pool and farming: https://guide.ston.fi/en/what-is-farming

Impermanent loss: https://guide.ston.fi/en/impermanent-loss

How to calculate impermanent loss: https://tools.ston.fi/impermanent-loss-calculator

See live stat of STON.fi on Defilama: https://defillama.com/protocol/ston.fi?volume=false

STON https://coinmarketcap.com/currencies/ston-fi/ & GEMSTON: https://coinmarketcap.com/currencies/gemston/ on CMC

You can drop your questions and feedback in the comments section or you might even join STON.fi (the leading project on $TON Blockchain) communities for more tangible and detailed info:

Telegram: https://t.me/stonfidex

DEX: https://app.ston.fi

All links: https://linktr.ee/ston.fi