Compliments of the season everyone! As we prepare for a loss-free 2025, STON.fi is thrilled to announce a groundbreaking extension of its impermanent loss protection program. Throughout the entire month of January, you can safeguard your liquidity within the highly sought-after STON/USDT v2 pool and navigate the dynamic crypto market with unwavering confidence.!
Here's the exciting catch (and it's a minor one): To qualify for this incredible protection, you need to be providing liquidity before January 1st. Don't miss out – jump in early and secure your spot!
Providing liquidity to decentralized exchanges (DEXes) like Uniswap can be a lucrative strategy. However, it comes with a significant risk: impermanent loss.
What Exactly is Impermanent Loss?
Impermanent loss occurs when the price of the assets you've deposited into a liquidity pool changes significantly. This price fluctuation can lead to a lower return compared to simply holding the assets.
The world of AMM protocols can be a whirlwind of fluctuating prices, leaving liquidity providers wondering if they've made a colossal mistake. But fear not, intrepid adventurer! This temporary value dip, known as impermanent loss, doesn't have to be a disaster.
Imagine a treasure chest overflowing with crypto that you contribute to a marketplace pool. This pool becomes a hub for others to trade these assets. In return for being the lifeblood of this marketplace, you earn a share of the trading fees. However, as people buy and sell, the ratio of your assets in the pool can fluctuate, potentially causing the total value of your contribution to bob up and down.
This is where impermanent loss creeps in. It's the difference between the value of your assets if you held them versus their current value in the pool. Crucially, this loss is only "impermanent" if you withdraw your assets before the prices return to their original levels.
Think of it like lending a friend a valuable asset. While they have it, you can't sell it for a potential windfall. But once you get it back, you can still cash in if the market explodes.
How Does Impermanent Loss Happen?
Example: Imagine you deposit 1 $ETH and 100 USDC into a pool.
Price Shift: If $ETH's price doubles, arbitrageurs will rebalance the pool, leaving you with less $ETH and more USDC.
The Loss: If you withdraw your assets, you might end up with less value than if you had simply held $ETH and $USDC.
Why Does it Occur?
Maintaining Constant Ratios: Liquidity pools aim to maintain a constant ratio between the deposited assets.
Price Volatility: When prices fluctuate, the pool must be rebalanced to maintain this ratio. This rebalancing can negatively impact your holdings.
Mitigating Impermanent Loss:
Choose Stable Pairs: Pools with stablecoins (like $USDC , #USDT ) experience less price volatility and therefore lower impermanent loss.
Focus on High-Volume Pools: Trading fees generated by high trading volume can offset potential impermanent loss.
Consider Impermanent Loss Protection Strategies: Some platforms offer innovative solutions to minimize the impact of impermanent loss.
Key Takeaways:
Impermanent loss is an inherent risk of liquidity provision in DeFi.
Understanding the mechanics of impermanent loss is crucial for making informed decisions.
By carefully selecting pools and exploring mitigation strategies, you can minimize the impact of impermanent loss on your DeFi investments.
How Can I Calculate Impermanent Loss?
Fret not, STON.fi has its own impermanent Loss Calculator that helps you mitigate your loss.
There are two primary methods for calculating impermanent loss:
Direct Method:
Calculate the initial value of your deposit: Determine the value of your initial deposit in terms of a stablecoin (e.g.USDC ) at the time of deposit.
Calculate the current value of your withdrawal: Determine the value of your withdrawn assets in terms of the same stablecoin.
Subtract initial value from current value: If the current value is less than the initial value, you've experienced impermanent loss.
2. Impermanent Loss Curve Function:
Utilize a pre-defined function: This function directly relates the price change of an asset to the percentage of impermanent loss incurred.
Input price change: Enter the percentage change in the price of the asset since your initial deposit.
Calculate impermanent loss: The function will output the corresponding percentage of impermanent loss.
Introducing the Guardian: Impermanent Loss Protection on STON.fi
Impermanent loss (IL) has long been a lurking beast for liquidity providers, preying on the uncertainties of fluctuating prices. But fret no more, STONfiers! STON.fi's innovative impermanent loss protection program steps in as your guardian, offsetting up to 5.72% of your IL, essentially shielding you from a potential 50% price drop in your assets. Plus, it's completely automatic! No need to file claims, just sit back, relax, and enjoy the peace of mind.
What kind of protection are we talking about? Buckle up! With STON.fi's impermanent loss protection, you can enjoy:
Offsetting up to 5.72% of your impermanent loss: This translates to a shield against a whopping 50% price decrease in your assets – that's some serious protection!
A monthly offset budget capped at a staggering $10,000: STON.fi is demonstrably committed to actively supporting a healthy pool of liquidity providers.
Automatic crediting – no claims needed! Just focus on providing liquidity and let STON.fi handle the rest.
A max offset per user of $100 (paid in $STON tokens): An additional safety net to soften any potential blows.
That's not all! STON.fi has made the entire process incredibly user-friendly. No complex applications or claim forms – everything happens automatically! Just focus on providing liquidity and let STON.fi be your DeFi guardian.
Important Note:
➤Make sure to go through the terms and conditions.
➤Provide liquidity on STON.fi to be eligible.
➤Stay Updated and Informed with STON.fi:
