★★ Liquidity Provision, Farming, and Staking — What's the Difference?

This text is recommended for advanced STON.fi users.

Liquidity Provision, Farming, and Staking are basic operations on the STON.fi DEX. All three are related to locking assets to receive additional rewards and opportunities. Let's understand how they differ from each other.

Liquidity Provision

A liquidity pool is a "cryptocurrency reservoir" that holds two tokens in equal value, for example, 5,234,238 tokens A (worth $1,000,000 at the current rate) and 8,398 tokens B (also $1,000,000). If you decide to exchange token A for token B, the smart contract will take the necessary amount of token B from the liquidity pool. The token A you sold will also go into the pool.

To ensure there are always funds in the liquidity pool, DEX encourages liquidity provision by regular users. On STON.fi DEX, you will receive a percentage of the fees from each transaction in the pool depending on the volume of liquidity provided.

You can learn how to provide liquidity in this section.

Farming

Imagine that tokens of project N are traded on DEX. It's important for the project to have more funds in its liquidity pools, as users will be able to trade in larger volumes. To achieve this, project N creates a farm on STON.fi, allocates tokens as rewards, and distributes them to farm participants for a limited time.

To start farming, you need to provide liquidity in the chosen pool. In return, you will receive LP-tokens — special tokens confirming your share in the pool. By starting farming, you temporarily lock LP-tokens in a smart contract and receive additional rewards until the farm closes or you decide to withdraw LP-tokens and funds.

In simpler terms, farming is additional rewards for providing liquidity.

You can read more about farming on STON.fi here.

Staking

Staking on STON.fi involves locking STON tokens. When staking, the token does not enter the liquidity pool but remains stored in a smart contract. STON staking brings unique rewards — rewards that cannot be obtained through liquidity provision or farming:

• ARKENSTON — a soulbound NFT permanently tied to your wallet. It cannot be sold or transferred to another person. ARKENSTON will be used in the future as an entry ticket to the STON.fi DAO — a closed community for making decisions about the future of STON.fi.

• GEMSTON — a community token traded on STON.fi and other exchanges. Its mechanics will be determined by the DAO. The calculator in the Stake tab will help you calculate the amount of GEMSTON that will come to your wallet immediately after staking.

You can learn how to stake STON from this section.