For anyone diving into decentralized finance (DeFi), liquidity farming is an enticing way to earn passive income. But like many beginners, I quickly ran into a major roadblock: impermanent loss (IL). The concept of losing value simply by providing liquidity to a pool felt discouraging, especially when the market became volatile.
That’s when I discovered ston.fi and its Impermanent Loss Protection (ILP) feature, which changed the game for me. Not only did it restore my confidence in farming, but it also taught me how to mitigate risks while maximizing rewards.
In this article, I’ll share how ston.fi’s ILP transformed my DeFi journey and provide a beginner-friendly guide for anyone looking to start farming on the STON/USDT V2 pool.
What Is Impermanent Loss (IL)?
Before diving into ILP, it’s essential to understand impermanent loss.
When you provide liquidity to a pool, the value of your tokens might fluctuate due to market price changes. If one token in the pair increases or decreases significantly in price relative to the other, your total assets might be worth less than if you’d simply held the tokens separately.
For example:
• You deposit 1 ETH and 1,500 USDT into a liquidity pool.
• If ETH doubles in value while USDT remains stable, the pool adjusts your holdings to maintain a 50/50 ratio.
• When you withdraw, your total value might be less than if you’d just held the 1 ETH and 1,500 USDT without providing liquidity.
This is impermanent loss, and it’s a common deterrent for new liquidity providers.
How ston.fi’s ILP Works
ston.fi’s Impermanent Loss Protection (ILP) offers a safety net for liquidity providers, particularly in the STON/USDT V2 pool. Here’s how it works:
• Coverage Period: From January 1 to January 31, 2025, ston.fi protects up to 5.72% of losses caused by a 50% price drop in $STON.
• Compensation Cap: Each user can claim up to $100 in IL protection during this period.
By cushioning potential losses, ILP allows you to farm with greater confidence, knowing you’re not entirely at the mercy of market volatility.
My Experience with ILP
A few months ago, I provided liquidity in another pool but suffered significant impermanent loss during a market downturn. The frustration of losing value was enough to make me rethink DeFi farming altogether.
But ston.fi’s ILP gave me a second chance. With the assurance of protection, I joined the STON/USDT V2 pool and began farming again. The ILP feature acted as a buffer, allowing me to focus on the rewards without worrying about extreme volatility.
Beginner’s Guide to Farming on ston.fi
If you’re new to farming, here’s a step-by-step guide to getting started with ston.fi and making the most of its ILP feature:
1. Understand the Basic
• Liquidity Farming: You provide tokens to a liquidity pool and earn rewards in return.
• STON/USDT Pool: This is a pair where you deposit equal values of STON and USDT tokens.
2. Create a Wallet and Add Funds
• Set up a crypto wallet like Tonkeeper
• Purchase STON and USDT from an exchange and transfer them to your wallet.
3. Visit ston.fi
• Navigate to the STON/USDT V2 pool on ston.fi.
• Connect your wallet to the platform.
4. Provide Liquidity
• Add equal values of STON and USDT to the liquidity pool.
• Confirm the transaction in your wallet.
5. Start Farming
• Stake your LP (liquidity provider) tokens in the pool to begin earning rewards.
• Monitor your rewards and enjoy the added protection of ILP during the coverage period.
6. Withdraw When Ready
• When you’re ready to exit, withdraw your tokens from the pool.
• If you’ve experienced impermanent loss, claim your compensation through ILP (if eligible).
Why ILP Is Perfect for Beginners
Farming can feel intimidating for new users, especially with the risks of impermanent loss. ston.fi’s ILP removes much of that fear by offering:
1. A Safety Net: Protects your funds during volatile periods.
2. Peace of Mind: Encourages participation without constant worry.
3. Simplicity: The process is user-friendly, making it accessible even to those new to DeFi.
Final Thoughts
ston.fi’s Impermanent Loss Protection (ILP) is more than just a feature—it’s a DeFi breakthrough. For me, it turned liquidity farming from a risky venture into a reliable income stream.
If you’re new to DeFi or hesitant about providing liquidity due to the risks, now is the perfect time to take the leap. With ston.fi’s ILP and the STON/USDT V2 pool, you can farm with confidence and enjoy competitive rewards.
Don’t let impermanent loss hold you back. Join the STON/USDT V2 pool today and experience the difference.
🔗 Get Started with ston.fi
