Description of Liquid Farming in Crescent
Liquid Farmingliberates LP farming positions by tokenizing it, where that tokenized one is called
LF coin. In other words,
Pool coincan be tokenized as
When a farmer provides liquidity to a pool and gets rewards via farming, the farmer’s liquidity as pool coins is locked in the farming module as staking of the pool coins. Due to this lock of the pool coins in order to get the farming rewards, the farmer’s liquidity of the pool coins cannot be utilized in other DeFi products. In this regards, getting the farming rewards and utilizing the farmer’s liquidity cannot be satisfied simultaneously so far.
In order to resolve this necessity, Crescent introduces a new feature called
liquid farming. This is for the farmers to utilize their liquidity, which is provided for a pool.
Difference between Farming and Liquid Farming
More than that,
Liquid Farmingprovides auto-compounding of the rewards by going through an auction process, which results in the exchange of the farming rewards coin(s) into the pool coin. Due to the existence of uncertainty of rewards auction, there can be a risk to underestimate the rewards as pool coins, e.g., the case that all bidders to the auction place bids with lower bidding price. However, when
Liquid Farmingis settled down and multiple bidders participate the rewards auction, the rewards would be exchanged in a proper price thanks to the market competition.