Written by Logan Smith

On June 3, 2021

Yield Farming on Proton

Starting today, you can earn APY in XPR by participating in the USDC/XPR liquidity pool, earning Liquidity Provider (LP) Tokens, and then staking your LP Tokens on Proton Swap’s Farms. As we’ve demonstrated with our short and long staking contracts, our system of smart contracts accurately records asset ownership and delivers payouts on time.

Key points:

  • In addition to providing liquidity on protonswap.com/pools and earning a portion of the transaction fees, yield farming is now available for the USDC/XPR liquidity pool on protonswap.com/farms.
  • LP Tokens, earned by providing liquidity to the USDC/XPR liquidity pool, can be staked on protonswap.com/farms for a variable APY. They can be unstaked at anytime.
  • The first 100 million XPR that will be earned through yield farming will come from our own company wallet; all XPR that is earned after that will enter the Proton ecosystem as part of scheduled inflation.
  • Liquidity Providers for all XPR pairs qualify for the LOAN Airdrop.

As DeFi matures, new ways to put your money to work become available. Although liquidity pools have been quite popular in recent months, the high gas fees associated with adding funds to liquidity pools have been discouraging. On Proton, with zero gas fees and instant transactions, there are fewer barriers to becoming a liquidity provider.

How to Get Started

To get started with yield farming, you first need to become a liquidity provider and earn LP Tokens. The interest you receive on LP Tokens, which represent the liquidity you provided, is known as yield, and the process of earning interest on LP Tokens is known as yield farming. When you provide liquidity for the USDC/XPR liquidity pool, you will farm a yield in XPR. You can get started in two easy steps:

Step One: 

Provide liquidity to the USDC/XPR liquidity pool at protonswap.com/pools. Make sure the two amounts you enter are equal to each other in value. For example: if the current exchange rate for 1 USDC is 135 XPR, and you want to add 10,000 USDC, then you also need to add 1,350,000 XPR. Once you’ve added the funds and confirmed the transaction, you’ll receive LP Tokens. The amount of LP tokens will be determined by the amount you contribute and will represent your share of the transaction fees generated by that pool. You can read more about providing liquidity on Proton Pools here.

Step Two: 

Go to protonswap.com/farms and stake the LP Tokens for a variable APY paid in XPR. When you click “Harvest,” your earned XPR will be moved to your wallet.

LOAN Airdrop for XPR Liquidity Providers

In anticipation of our upcoming LOAN token airdrop for Proton Lend, individuals who add XPR to a liquidity pool of any XPR pair will be eligible for the LOAN airdrop at a 2:1 ratio – meaning you will receive 2 LOAN for every 1 XPR you add to an XPR liquidity pool.

What are liquidity pools?

DeFi can’t exist without liquidity pools. Here’s how they work: a series of cryptocurrency holders place pairs of their own cryptocurrency (for example, XPR and XBTC) into a liquidity pool for these assets. A smart contract records how much crypto they placed into this pool, and LP tokens are issued, ensuring their ownership of the assets. When traders trade against these pools, they pay a small transaction fee, which will be distributed between liquidity providers. In this way, a decentralized exchange economy is achieved.

What are the risks?

Like most things in DeFi, there are a few risks associated with becoming a liquidity provider. “Impermanent loss” is a particular risk associated with liquidity pools where an LP may temporarily lose an amount of the funds they committed to a liquidity pool. This happens when the cryptocurrency pair that is being traded is highly volatile. It is a common risk of liquidity pools across the DeFi, so it is important to keep this risk in mind.

If you’re ready to start providing liquidity and yield farming on Proton, visit protonswap.com. There, you will be able to connect your Proton Wallet account, select the asset pair you’d like to provide liquidity for, and enter into a smart contract. Make sure to select an XPR pair, if you want to stake your LP Tokens for APY. Visit the same link to monitor your earnings, add more liquidity to the pools, remove your assets from a liquidity pool, and harvest your yield.

Welcome to Proton, we’re glad you’re here.

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