๐๐จ๐ฐ ๐๐๐๐.๐ ๐โ๐ฌ ๐๐ฆ๐ฉ๐๐ซ๐ฆ๐๐ง๐๐ง๐ญ ๐๐จ๐ฌ๐ฌ ๐๐ซ๐จ๐ญ๐๐๐ญ๐ข๐จ๐ง ๐๐๐ง ๐๐๐ฅ๐ฉ ๐ฉ๐ซ๐จ๐ญ๐๐๐ญ ๐ฒ๐จ๐ฎ ๐๐ซ๐จ๐ฆ ๐ซ๐ข๐ฌ๐ค๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐๐๐ ๐ ๐ฐ๐จ๐ซ๐ฅ๐.
Imagine this: you borrowed $1000 from me, and at the exchange rate of #1400 per dollar, you received a total of #1,400,000.
Fast forward three months, and youโre ready to pay me back. But hereโs the twist โ rate is now #1700 per dollar which means $1000 is now equivalent to #1,700,000.
How much do you owe? ๐๐ ๐ถ๐ #๐ญ,๐ณ๐ฌ๐ฌ,๐ฌ๐ฌ๐ฌ ๐ผ๐ฟ #๐ญ,๐ฐ๐ฌ๐ฌ,๐ฌ๐ฌ๐ฌ?
When I asked this question in the Timeline earlier today, 28% voted for #1,400,000, showing that some donโt know about the risks that comes alongside DEFI activities.
This brings us to a key concept that every DeFi participant should understand โ ๐๐ ๐ฃ๐๐ฅ๐ ๐๐ก๐๐ก๐ง ๐๐ข๐ฆ๐ฆ.
๐๐๐๐ ๐๐ ๐๐๐๐๐๐๐๐๐๐๐ ๐๐๐๐?
In the world of decentralized finance (DeFi), impermanent loss refers to the loss you might experience when you provide liquidity to a pool, and the price of the tokens you added changes during the farming period.
You start with a certain amount of value, but after a while, due to price fluctuations, the value of your tokens in the pool might decrease.
Think of it like this: Youโre giving out tokens and, after some time, getting back less value. This is the essence of impermanent loss.
๐ ๐๐๐๐ฅ-๐๐ข๐๐ ๐๐ฑ๐๐ฆ๐ฉ๐ฅ๐: ๐๐๐๐๐ ๐๐จ๐ค๐๐ง ๐ ๐๐ซ๐ฆ๐ข๐ง๐ ๐จ๐ง ๐๐๐๐.๐๐ข ๐๐๐
Letโs break it down with an example. You decide to buy 10,000 MAJOR tokens for $200 (thatโs $0.02 per token). After hearing about a farming opportunity in the MAJOR/TON pool on STON.fi DEX, you decide to participate by adding your 10,000 MAJOR tokens to the pool.
A few weeks later, on December 28, you come back to claim your tokens, but thereโs a problem โ the price of MAJOR has dropped 50%.
The MAJOR token you bought at $0.02 is now worth just $0.01. So, your $200 investment is now only worth $100.
This is a classic case of impermanent loss. Youโve experienced a drop in value because the price of your token has decreased while it was in the liquidity pool.
๐๐จ๐ฐ ๐๐๐๐.๐ ๐ ๐๐๐ฅ๐ฉ๐ฌ: ๐๐ฆ๐ฉ๐๐ซ๐ฆ๐๐ง๐๐ง๐ญ ๐๐จ๐ฌ๐ฌ ๐๐ซ๐จ๐ญ๐๐๐ญ๐ข๐จ๐ง
Now, hereโs where things get interesting. STON.FI recently introduced a new feature aimed at partially protecting liquidity providers like you from impermanent loss.
On December 9, they announced an impermanent loss protection feature thatโs designed to cushion the blow when token prices fluctuate in the pool.
๐๐๐ญโ๐ฌ ๐๐ซ๐๐๐ค ๐๐จ๐ฐ๐ง ๐ก๐จ๐ฐ ๐ญ๐ก๐ข๐ฌ ๐ฉ๐ซ๐จ๐ญ๐๐๐ญ๐ข๐จ๐ง ๐ฐ๐จ๐ซ๐ค๐ฌ:
๐ช๐ต๐ถ๐ฐ๐ต ๐ฃ๐ผ๐ผ๐น๐ ๐๐ฟ๐ฒ ๐๐น๐ถ๐ด๐ถ๐ฏ๐น๐ฒ?
The STON/USDT V2 pool is the only one that qualifies for this protection.
๐๐ผ๐ ๐ ๐๐ฐ๐ต ๐๐ฎ๐ป ๐ฌ๐ผ๐ ๐ข๐ณ๐ณ๐๐ฒ๐?
You can offset up to 5.72% of your impermanent loss, which corresponds to a 50% decrease in asset price.
๐ ๐ผ๐ป๐๐ต๐น๐ ๐๐๐ฑ๐ด๐ฒ๐
The total offset for all users is capped at $10,000 per month, and each user can receive a maximum offset of $100 in STON tokens.
๐๐ผ๐ ๐๐ผ ๐ฌ๐ผ๐ ๐๐ฒ๐ ๐๐?
The best part is that the crediting is automatic. No claims needed! If the STON rate decreases during the eligible period, the offset is applied directly to your account.
๐ข๐ณ๐ณ๐๐ฒ๐ ๐ฃ๐ฒ๐ฟ๐ถ๐ผ๐ฑ
The protection is available from December 12, 00:00 UTC to December 31, 23:59 UTC, so itโs a great time to take advantage of it before the end of the year.
Since the launch of this feature, Iโve been happily providing liquidity on STON.fi DEX, knowing that thereโs some protection against the volatility that can sometimes hit the market. Itโs like driving through a tricky situation in a bulletproof car โ you know youโre not completely invincible, but you feel much safer.
๐ ๐๐ฎ๐ข๐๐ค ๐๐๐ฆ๐ข๐ง๐๐๐ซ: ๐๐ญโ๐ฌ ๐๐จ๐ญ ๐๐ง๐ฌ๐ฎ๐ซ๐๐ง๐๐
While this protection feature is a fantastic addition to the STON.FI platform, itโs important to note that itโs not an insurance product. Itโs a discretionary program.
That means itโs not guaranteed to fully reimburse all of your losses, and you should not rely on it as a guarantee of returns.
I suggest you Check out these valuable analysis about STON.fi and TON blockchain at large, before proceeding with your DeFi activity;
โ๏ธ STON.fi DEX Data (TVL, Trading Volume etc.)
โ๏ธ All TON Protocols Data
โ๏ธ Information about All Tokens traded on STON.fi
For more details on the program, you can check out the full terms and conditions here.
๐๐ซ๐๐ฉ๐ฉ๐ข๐ง๐ ๐๐ญ ๐๐ฉ
DeFi can be an exciting, yet volatile space to navigate. Understanding the risks โ like impermanent loss โ is crucial for anyone providing liquidity.
However, with features like impermanent loss protection from STON.fi, you can participate more confidently, knowing that part of your risk is mitigated.
So, this Christmas season, as you enjoy some holiday cheer, you can also enjoy the benefits of seamless liquidity provision and farming, with a little extra peace of mind.
While the risks in DeFi will always be there, this protection helps you face them with more confidence.