The liquidity pool is a great tool for passive income, but like any other investment, it comes with risks, specifically impermanent losses. To protect its users from these losses, STON.fi has introduced protection against impermanent losses, offering compensation in such cases.

A liquidity pool is a “reservoir” of tokens provided by users to enable trading on the exchange. Users deposit tokens into the pool in equal value proportions to maintain balance. In return, they earn a share of the fees generated from each transaction that occurs within the pool.

What is “impermanent loss”?

Impermanent loss refers to the difference in value that occurs when you add assets to a liquidity pool instead of holding them yourself. This loss arises from the redistribution of tokens within the pool when their prices change to maintain balance. The greater the price fluctuation, the larger the loss. However, if the prices return to their original levels, the losses are reversed.

For example, you deposit 100 STON tokens worth 4,45$ each and an equivalent of 445 USDT into the liquidity pool. After some time, the price of STON drops to 4$. To balance the token ratio in the pool, the market maker sells some USDT and buys more STON because STON is cheaper.

When you decide to withdraw your assets from the pool, you will receive more STON tokens, but their value in dollars will be lower since the price of STON has dropped. Your contribution will now consist of more STON tokens and fewer USDT, but the total value of these assets will be lower than your initial deposit. If the price of STON returns to 4,45$, your losses will disappear, as the value of your tokens will return to the same level as at the time of your initial investment. However, if the price doesn’t recover and you withdraw your assets before that, the losses will become permanent.

Impermanent Loss Protection

When providing liquidity to the STON/USDT v2 pool on STON.fi, the permanent losses that occur due to the price drop of STON are partially compensated.

How does it work?

🔹 If you provide liquidity to the STON/USDT v2 pool and the price of STON drops, you will receive compensation for up to 5,72% of the permanent loss. This corresponds to a 50% price drop of the asset.
🔹 The monthly compensation budget is limited to 10,000$, and the maximum payout per user is 100$.
🔹Payouts are made automatically.
🔹 Currently, compensation is valid until January 31, 23:59 UTC. To participate, you must provide liquidity by January 1!

It is likely that the permanent loss compensation on STON.fi will be extended. You can stay updated by following the official STON.fi Telegram channel.

How to add liquidity to the pool?

1. Go to the STON/USDT v2 pool and connect your TON wallet.
2. Click on “Add Liquidity” and select the STON and USDT tokens.
3. Specify the amount to add and confirm the transaction — done!

#DYOR. All investments carry risks. Always do your own research.

Resources and social networks of the ston.fi: