In this article, I’ll explain what impermanent loss is and how STON.fi plans to address it.
What is Impermanent Loss❓
Impermanent loss occurs when you provide liquidity to a pool and one or both tokens significantly change in value.
When the price changes, the liquidity pool’s balance of assets in equivalent value (1:1 ratio) is disrupted. The pool then automatically rebalances the assets to restore the 1:1 ratio in dollar value. For example, ensuring the TON/USDT pool has $100 in TON tokens and $100 in USDT tokens.
This rebalancing causes impermanent loss.
To better understand how much you could lose due to impermanent loss, I recommend using STON.fi’s Impermanent Loss Calculator.
Impermanent loss is the difference between providing liquidity to a pool and simply holding the same cryptocurrency in your wallet.
How Does STON.fi Propose to Solve Impermanent Loss? 💡
STON.fi offers compensation for funds lost due to impermanent loss.
Currently, this feature is only available in the STON/USDT pool. STON.fi will reimburse up to 5.72% of impermanent loss, which corresponds to a doubling or halving of the STON token’s value.
Key Details ☝️
Compensation is automatically credited in STON tokens.
The monthly protection budget is capped at $10,000.
The maximum payout per user is $100.
To be eligible for compensation, you must add liquidity before Jan 1.
Campaign period: December 12, 2024 — January 31, 2025.
What Does the Future Hold for This Feature? 📈
Currently, this is an experimental innovation aimed at assessing community interest. If the community shows strong interest, this feature will continue to evolve.
I believe that in the future, such protection will become a standard feature, easily activated by token creators, just like farming is today. This, in turn, will increase the amount of liquidity on STON.fi!