Impermanent Loss Protection & New Farms!

Elk.Finance
Apr 18 · 5 min read

Team Elk is happy to announce a thrilling update and a big roadmap milestone that will benefit our liquidity providers. Starting on April 19, 2021, we will be implementing Impermanent Loss Protection! Read on for details and information about the new yield farms…

[NOTE: There will be new farms starting April 19, so providers will have to withdraw from the current farms and deposit into new ones to keep earning rewards and qualify for Impermanent Loss Protection. You will still be able to access your liquidity from the old farms after the new farms start, but they will no longer earn rewards after April 19.]

Impermanent Loss Protection

What is Impermanent Loss Protection?

Liquidity providers are subject to impermanent loss (IL): a loss that occurs when the price ratio of the two assets that make up the liquidity pair diverges. In any liquidity pool, as the price of each asset goes up or down, the ratio of the tokens you’ve provided will adjust to maintain equal price weighting. IL happens when liquidity is provided to a pool, and during that time the price of the assets change, compared to the price of them when they were added to the pool. The higher the deviation, the higher the exposure to IL. This will happen, no matter which direction the price of the tokens goes.

You can think of your liquidity position as a boat filled with water: if one side of the boat becomes too heavy, a little water spills over, offsetting some of the gains from transaction fees and rewards that you’ve earned by staking liquidity. This loss is considered “impermanent” because it will be recovered if the initial price ratio on your deposit is restored (i.e. the boat levels out again).

Tell me about it. I deposited LP for this hot new token on another DEX, and it dumped 80% while I was sleeping. Rekt!

We hear you! That’s why Elk has your back. Our first and best defense against loss of value is our sound tokenomics, which are carefully designed to promote sustainable, long-term growth for ELK holders. But we also believe that none of our valued liquidity providers should walk away with less than they put in, period. This is why we are implementing Impermanent Loss Protection.

But how will Elk protect me from impermanent loss?

The pools will be paid extra ELK to make up for losses due to IL. If the price of ELK goes down relative to the partner token, you will receive additional ELK rewards when you unstake, ensuring that you won’t walk away with less than your initial deposit in dollar value. This coverage also goes both ways, so if the price of ELK goes up relative to the partner token, you will receive ELK to compensate for the opportunity cost from providing liquidity rather than holding each token individually.

Wait, won’t that lower the price of ELK?

Well, there’s a risk of that happening. That’s why we will not be paying the difference in one go; instead, the insurance coverage will increase over a period of 42 days. Yes, the magic 42. If you withdraw your liquidity earlier than 42 days, your IL protection will be prorated based on the number of days you’ve been in the farm. This also adds a long-term staking incentive. Additionally, there is a limit on how much will be paid per day from the insurance fund, which is equal to the daily rewards rate for the designated farm.

For the pilot round of IL Protection starting on April 19 and lasting until May 10, you will only need to stake your liquidity for the duration of the rewards cycle (not a full 21 days) to qualify for 100% coverage. This initial period will allow for any necessary adjustments to the insurance contract to ensure that it is fair and sustainable for everyone in the Elk community. In this initial period, no prorating takes place: you only get the protection if you do not withdraw from the farm before the end of round 2.

Important: in order to benefit from IL Protection, you will need to stake your liquidity pairs into the farm by 23:59 UTC on April 20 and withdraw them on May 10 and not before! It is not enough to just add liquidity to the pair, the Elk Liquidity Pair tokens must be staked in the farm! If you withdraw or exit from the yield farm, your coverage will be canceled and you will not receive compensation in case of impermanent loss until the next round of farming! Claiming your ELK rewards is, of course, allowed and will not cancel your coverage. You may also add liquidity pairs at any time after April 20 but these will not qualify for IL Protection. In particular, if you are using auto-compounders, the compounded amount is, therefore, excluded from the coverage.

Insurance fund? Who is paying for this?

Good question! There is a specific pool to cover IL Protection. The initial funding for the IL Protection pool is based on the token allocation outlined in our litepaper. Impermanent loss is currently one of the largest roadblocks to widespread adoption across DeFi. IL Protection is just one of the groundbreaking innovations that will continue to position Elk at the forefront of the DeFi revolution.

New ELK Yield Farm

Farming starts April 19, 2021 at 12:00 UTC. End of round #2: May 10, 2021.

AVAX Farms & $ELK Daily Rewards

  • ELK-AVAX: 400
  • ELK-USDT: 200
  • ELK-ETH: 150
  • ELK-WBTC: 100
  • ELK-LINK: 100
  • ELK-DAI: 100
  • ELK-PNG: 50
  • ELK-YTS: 50
  • ELK-OLIVE: 50
  • ELK-PEFI: 50
  • ELK-SPORE: 50
  • ELK-SUSHI: 50

MATIC Farms & $ELK Daily Rewards

  • MATIC-ELK: 400
  • USDT-ELK: 100
  • USDC-ELK: 100
  • ETH-ELK: 100
  • WBTC-ELK: 100
  • LINK-ELK: 100
  • DAI-ELK: 100
  • QUICK-ELK: 50
  • AAVE-ELK: 50
  • GHST-ELK: 50
  • MUST-ELK: 50
  • CC10-ELK: 50
  • DEFI5-ELK: 50
  • CEL-ELK: 50

For additional questions, join our telegram group: https://t.me/elk_finance_chat!

Even though we’re hitting an important early milestone, we have more exciting stuff coming up which will be announced very soon!

Starting from this moment we will also be translating articles to Turkish as well, to support our Turkish followers!

You can not only rarely spot elk in the forest, but you can find us on other channels as well:

With Love,

— Team Elk

Elk Finance

Elk.Finance is a decentralized network for cross-chain liquidity.

Elk Finance

ElkNet, its cutting-edge multi-chain protocol, makes it easy for anyone to move value and exchange cryptocurrencies across blockchains quickly and securely at a low cost. The ElkNet framework also lets developers imagine and build novel cross-chain applications.

Elk.Finance

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Elk.Finance is a decentralized network for cross-chain liquidity. Seamless experience with sub-second speed. Any chain, anytime, anywhere!

Elk Finance

ElkNet, its cutting-edge multi-chain protocol, makes it easy for anyone to move value and exchange cryptocurrencies across blockchains quickly and securely at a low cost. The ElkNet framework also lets developers imagine and build novel cross-chain applications.