{"id":32039,"date":"2024-12-30T10:55:55","date_gmt":"2024-12-30T10:55:55","guid":{"rendered":"https:\/\/mycryptomania.com\/?p=32039"},"modified":"2024-12-30T10:55:55","modified_gmt":"2024-12-30T10:55:55","slug":"how-ston-fi-reduces-the-effect-of-impermanent-loss-on-liquidity-providers","status":"publish","type":"post","link":"https:\/\/mycryptomania.com\/?p=32039","title":{"rendered":"How ston.fi reduces the effect of impermanent loss on liquidity providers"},"content":{"rendered":"

Ston.fi\u2019s \u201cimpermanent loss protection\u201d feature is\u00a0live!<\/strong><\/p>\n

Geraldmed1<\/p>\n

Hey, Stonfiers, have you been wondering why every time you stake or provide liquidity to a certain pool and at the end of exiting your pools (at the end of staking period) you realize that you\u2019re short in a couple of dollars?. Don\u2019t worry by the end of this article you\u2019ll be able to understand what happened in simplest terms, how you can mitigate these losses, you\u2019ll also get to know the unique feature Ston.fi just launched to help minimise this loss the \u201cimpermanent loss protection\u201d I\u2019ll also introduce you to impermanent loss calculator.<\/p>\n

It\u2019s quite easy to make money this way, but you must be aware of the risks of investing in liquidity pools, and the most common risk is impermanent loss.<\/p>\n

What is impermanent loss?<\/h3>\n

Impermanent loss is the reduction in value that occurs when the price of the tokens deposited in a liquidity pool changes compared to their price at the time of deposit. Source:https:\/\/blog.ston.fi\/impermanent-loss-explained-a-guide-for-defi-liquidity-providers\/<\/a><\/p>\n

What does this\u00a0mean?<\/h3>\n

Permit me to use this real life scenario to break it down for better understanding. Imagine you own a snack shop and have 10 chocolate bars and 10 bags of chips, each worth $1, so you have $20 in total. You decide to join a local snack exchange,\u00a0to\u00a0trade\u00a0your\u00a0snacks.<\/p>\n

If the price of chocolate doubles to $2 per bar, while chips stay at $1. The snack exchange balances your stock, so instead of 10 chocolate bars and 10 bags of chips, you now have 7 chocolate bars and 14 bags of chips to match the new\u00a0prices.<\/p>\n

If you leave the exchange now and take back your snacks, their total value is $18 instead of $20 because the exchange changed your\u00a0amounts.<\/p>\n

What actually happened?<\/h3>\n

In the exchange, your snacks are adjusted to keep their total value balanced (50% chocolate, 50% chips). When the price of chocolate goes up, the exchange reduces the number of chocolate bars you own and gives you more chips to keep the\u00a0balance.<\/p>\n

Here\u2019s the math<\/strong>:
Original value: 10 chocolate bars at $1 each = $10, and 10 chips at $1 each = $10. Total =\u00a0$20.<\/p>\n

After price change: Chocolate is now $2 per bar. To balance the 50\/50 rule, your holdings are adjusted\u00a0to:<\/p>\n

7 chocolate bars at $2 each =\u00a0$14<\/p>\n

14 chips at $1 each =\u00a0$14<\/p>\n

But since the exchange is constantly balancing based on trades, you get less value when you withdraw:<\/p>\n

Total value = $18 instead of\u00a0$20.<\/p>\n

Your chocolate bar is your STON and chip is your USDT In a liquidity pool of STON\/USDT: https:\/\/app.ston.fi\/pools\/EQDcFD0T-3TIe7sF3MelkkRh9eDJ73N76-5WhCt8h8IY_5iu<\/a><\/p>\n

This can be calculated using this\u00a0formula<\/p>\n

Where: P0 is the initial\u00a0price<\/p>\n

P1 the current\u00a0price<\/p>\n

IL= impermanent loss<\/p>\n

If you\u2019re not a fan of mathematics,The good news is, Ston.fi has developed a special tool( calculator) that you can use to calculate this loss without going through the stress of doing all the\u00a0maths.<\/p>\n

Access the impermanent loss calculator here https:\/\/tools.ston.fi\/impermanent-loss-calculator<\/a><\/p>\n

To protect liquidity providers from this losses, ston.fi have went further to introduce a unique feature for TON Blockchain; \u201dimpermanent loss protection \u201c What is it\u00a0about?<\/p>\n

Impermanent loss protection is\u00a0live<\/h3>\n

Ston.fi launched this programme to reduce the effect of impermanent loss on liquidity providers. Note this is not an insurance scheme what this means is, this protection package is not going to cover for all the losses you might\u00a0incure.<\/p>\n

The impermanent loss protection program was launched on the 9th of December 2024 and is set to run from 12th December to 31st January\u00a02025<\/p>\n

Note to participate you need to provide liquidity before January 1st\u00a02024.<\/p>\n

Here is what you need to\u00a0know<\/h3>\n

Which pool is eligible?<\/strong><\/p>\n

According to ston.fi announcement, only STON\/USDT<\/strong> is qualified to benefit from this protection.<\/p>\n

How much can be offset?<\/strong>
The offset rate is up to 5.72% impermanent loss (corresponds to a 50% decrease in the asset\u00a0price).<\/p>\n

Monthly budget\u00a0
Overall Offset Limit: The total limit for the Offset payouts for all the eligible participants is capped at $10,000 for each announced Validity Period (Offset Cap) and each LP can receive a maximum offset of $100 in STON token.
Liquidity provision
To participate, participants would have to provide liquidity to STON\/USDT pool before 1st January 2025
0ffset period<\/p>\n

The good news is ston.fi just extended the offset period by 1 month that is from 12th December 2024 to 31st January 2025, you can\u2019t afford to miss out this opportunity.<\/p>\n

What are the benefits of this Impermanent loss protection?<\/strong><\/p>\n

This will help cushion and reduce the losses incurred by liquidity providers, when there\u2019s a drop in price assets, with this protection, LPs can provide liquidity with confidence.<\/p>\n

Mitigating a portion of impermanent loss, reducing the barrier to entry and risks on liquidity providers. This benefits both users and the DeFi ecosystem as there\u2019s an increase in the liquidity pool depth.\u00a0there are other measures which can be taken to mitigate these losses check articles on ston.fi Blog https:\/\/blog.ston.fi\/impermanent-loss-explained-a-guide-for-defi-liquidity-providers\/<\/a><\/p>\n

Struggling with liquidity provision? Or just starting your Defi journey and want to take this opportunity?<\/p>\n

Here are resources to guide you on how to provide liquidity on ston.fi Dex, https:\/\/guide.ston.fi\/en\/how-to-provide-liquidity-on-ston.fi<\/a><\/p>\n

They\u2019re also other resources I used to better understand how to earn passive income from Defi through liquidity provision, here is one of the videos I watched. https:\/\/youtu.be\/FZ3sriN9j40?si=y3tsDqaSdBmW4gFt<\/a><\/p>\n

Conclusion
Although this does not cover all the losses that might be incurred during price fluctuation, this is an important step Ston.fi has initiated in the DeFi community. This is a one-of-a-kind opportunity to take advantage of this initiative and step up your game with a passive income by just providing liquidity.<\/p>\n

If you found this article interesting, check out other educative articles about ston.fi on my\u00a0blog<\/p>\n

Helpful Resources:<\/strong><\/p>\n

STON.fi DEX Data on DeFi Lama: STON.fi\u2019s Total Value Locked (TVL) is approximately $115.11M.<\/p>\n

Explore more on DeFi Lama https:\/\/defillama.com\/protocol\/ston.fi?volume=false<\/a><\/p>\n

TON Stat https:\/\/www.tonstat.com\/<\/a>\u00a0.<\/p>\n

Tonscan\u00a0https:\/\/tonscan.com\/statistics<\/a>.<\/p>\n

STON.fi on Dexscreener: https:\/\/dexscreener.com\/ton\/stonfi<\/a><\/p>\n

For more information check out ston.fi platforms here https:\/\/linktr.ee\/ston.fi<\/a><\/p>\n

How ston.fi reduces the effect of impermanent loss on liquidity providers<\/a> was originally published in Coinmonks<\/a> on Medium, where people are continuing the conversation by highlighting and responding to this story.<\/p>","protected":false},"excerpt":{"rendered":"

Ston.fi\u2019s \u201cimpermanent loss protection\u201d feature is\u00a0live! Geraldmed1 Hey, Stonfiers, have you been wondering why every time you stake or provide liquidity to a certain pool and at the end of exiting your pools (at the end of staking period) you realize that you\u2019re short in a couple of dollars?. Don\u2019t worry by the end of […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-32039","post","type-post","status-publish","format-standard","hentry","category-interesting"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/32039"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=32039"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/32039\/revisions"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=32039"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=32039"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=32039"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}