Impermanent losses in liquidity pools are one of the reasons why many are hesitant to provide liquidity, as commission earnings may not always be more profitable. But is it worth losing the opportunity for passive income from liquidity pools?
Impermanent losses occur when the price ratios of tokens in a liquidity pool change significantly, causing an automatic redistribution of tokens in the pool (a token is sold when its price increases, or a cheaper token is bought). In such cases, there’s a chance that keeping money out of the pool could have earned you more, or in the event of a sharp decline, you would have lost less. These losses are called impermanent because, once the price ratios of the provided tokens return to their original state, losses disappear.
To protect liquidity providers, STON.fi introduced impermanent loss protection in the STON/USDT v2 pool. If the price of $STON is decreasing, liquidity providers will be compensated up to $100 per person as part of the impermanent loss protection, with a maximum compensation limit of $10,000 per month. To use this protection, liquidity must be provided by February 1st. The protection is valid until February 28th. Compensation payments will be made automatically to your wallet. It’s possible that it will be extended again, as it was before.