LPs Farming is a special feature developed exclusively on the Shibarium network. The goal of LPs Farming is to decentralize liquidity. In other projects, the development team holds a large amount of liquidity and promises to lock it for a certain period, which leads to potential risks for early investors. However, with LPs Farming on PiSwap, we give all of our Team LP Tokens to the community, allowing everyone to farm them. Besides providing more liquidity for users, this makes the project "rug-pull-proof" (meaning it is difficult to pull out funds unexpectedly).
All the LP Tokens from the development team are contributed to farming pools, and they are gradually released to those who stake their LP Tokens in those pools. This ensures that developers have the same level of access to these tokens as any other user.
Why is LPs Farms better than a DEV Lock?
First of all, let's understand what DEV Lock is. DEV Lock is a mechanism through which projects compensate developers of the project. The important thing is that when a project is created, typically a portion of the liquidity collected during the fundraising process (IFOs, ICOs, Launchpads, etc.) is locked in a specific contract accessible only by the developers' wallets and can only be requested after a certain period of time.
However, what can happen is that after the specified time has passed, when developers can request their LP (Liquidity Provider) tokens, they start dumping these tokens, causing the project's liquidity to dry up. This leads to significant risks for investors, as it devalues the token and harms the investment.
With LPs Farms, developers contribute the liquidity they have collected from the Launchpad and store it in a special smart contract that allows any user to connect to it. This contract works just like any standard staking contract, with one important difference: the profits from the investment come from staking LP tokens into the farming pool, rather than the original project token.
LPs Farms form the foundation of the Decentralized Permanent Liquidity Protocol that Piswap has introduced to the cryptocurrency market.
LPs Farms allow any user to continuously reinforce their position in the project simply by reinvesting their newly earned LP tokens, saving time and transaction costs for users.
The LPs Farms protocol aims to make the DeFi ecosystem safer for all users by providing a new mechanism for providing and maintaining liquidity.
Designed to benefit long-term investors, LPs Farms impose higher fees both when staking and when withdrawing from the pool. This prevents the behavior of "ordinary whales" who enter, make quick profits, and leave the pool with all the drained liquidity.
In summary, the LP Farming contract will charge a 10% fee for depositing, reinvesting, and withdrawing funds. By charging higher fees for entry and exit (which are then returned to the rewards pool), LPs Farms ensure that the rewards pool will never run out of rewards. Users who hold their liquidity in the contract for the longest period will receive the most rewards.
In a broader sense, the LPs Farms mechanism works as follows: Suppose some users want to withdraw their tokens from the contract when they have achieved their expected profits or when the pool is no longer attractive to them. When these users withdraw, the rewards pool will increase from the withdrawal fees they paid. This means that the rewards for users who still hold their liquidity in the contract will be larger, making the contract more attractive to others willing to provide liquidity.
This LPs Farms mechanism will ensure that $PI or other projects will always have liquidity.