🌊Liquid Farming

The Liquid Farming concept is a successor to the liquid staking concept with one signicant difference: Liquid Farming allows users to remain liquid while participating in farming on AMM pools. It introduces new possibilities and strategies for liquidity providers, which will be further discussed in this paper.

Algem’s Liquid Farming introduces a novel approach to liquidity provisioning and farming on the Soneium. By enabling users to remain liquid while participating in AMM farming activities, this innovative product significantly enhances flexibility, incentivization, and revenue opportunities for liquidity providers.

Key Features of Liquid Farming

1. lfETH Token Mechanism

   • Liquid Representation: lfETH functions as a liquid derivative of ETH, providing users the ability to claim their underlying assets upon vault expiration.

   • Utility and Flexibility: Users can utilize lfETH in multiple ways, such as trading on AMMs, leveraging as collateral, or hedging their positions.

2. Enhanced Rewards System

   • ALGM Incentives: Users earn proportional ALGM rewards based on their staking contributions.

   • Dynamic Farming Rewards: By staking ALGM tokens in dedicated pools, users can maximize their farming rewards.

3. Flexible Participation Options

   • Vault Selection: Users can choose from multiple vaults with varying expiration dates and incentive structures.

   • Early Liquidity Access: lfETH enables liquidity providers to trade or utilize their assets without waiting for vault expiration.

Advantages Over Traditional Farming

1. Continuous Liquidity

   • Unlike traditional farming mechanisms, Liquid Farming ensures that users maintain liquidity through lfETH tokens, allowing them to adapt to market changes.

2. Hedging Opportunities

   • By selling lfETH, users can mitigate potential losses if the price of ETH declines, providing a unique hedging mechanism.

3. Simplified Rewards Distribution

   • Rewards are distributed in ERAs and can be claimed manually, offering predictable and transparent earnings for participants.

Core Mechanics and Flow

1. Liquidity Provisioning

   • Users supply ETH and ERC20 tokens to Algem’s supported AMM pools and receive LP tokens.

   • LP tokens are locked into vaults, where corresponding lASTR tokens are minted.

2. Dynamic Reward Allocation

   • Farming rewards depend on a balance between a user’s staked ALGM and their share of LP tokens, with the weighting shifting progressively towards ALGM staking over time.

3. Liquidation Safeguards

   • A built-in liquidation mechanism ensures a 1:1 ratio of ETH to lfETH, protecting users from imbalances and securing their initial investments.

Revenue Model and Tokenomics

1. Fee Structure

   • Algem charges a 10% fee on farming rewards, contributing to the ALGM staking pool and supporting the platform’s sustainability.

2. ALGM Token Utility

   • ALGM plays a central role in farming mechanics by reducing token velocity and establishing consistent demand through staking pools and governance.

User Benefits

1. Maximized Earnings

   • Liquid Farming provides additional rewards through ALGM incentives and trading opportunities with lfETH tokens.

2. Improved Flexibility

   • Users can adjust their strategies dynamically by trading or utilizing lfETH while maintaining eligibility for rewards.

3. Sustainable Ecosystem

   • The innovative mechanics ensure long-term demand for ALGM and attract sustainable liquidity to AMM pools.