Crescent Docs

Liquid Farming Process

This explains how liquid farming works with rewards auction
Illustration of Liquid Farming Process
  1. 1.
    A liquidity pool is registered for Liquid Farming by governance.
    • In governance parameter, the auction period and auction fee rate are defined.
  2. 2.
    Once the pool is added to the parameter after the governance is passed, a user liquid-farms with their pool coin and the module mints LF coin according the mint rate and send to the user.
    • When users do liquidfarm their pool coins, on behalf of farmers, the module stakes their pool coin to the farming module and receives farming rewards for every block.
    • In every auction period, the auction of the rewards to be accumulated until the end of the auction period is going through and anyone can participate the auction by bidding with pool coins for the rewards.
    • The bidder placing with the highest amount of pool coin at the end of the auction becomes the winning bidder. The winning bidder gets all the rewards accumulated until the end of the auction except the fee rate.
    • The pool coin of the winning bid amount goes to the liquid farm so that the number of pool coins per LF coin increases, i.e., the value of the LF coin becomes higher.
    • The module provides 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.
  3. 3.
    The user can use the LF coin in Crescent DeFi product or can be IBC-transferred to be used as collateral in other DeFi.
  4. 4.
    The user having LF coin can liquid-unfarm it to get back the pool coin according to the burn rate.
Increase of LF coin value thanks to rewards auction process