Yield Farms allow users to earn WECO while staking LP Tokens.
Yield farming offers liquidity providers to earn WECO rewards by locking their LP tokens into a smart contract. The purpose is to balance out the risk that comes along with liquidity lock-in.
Yield Farm rewards include both:
- LP rewards earned through providing liquidity and
- Farm rewards earned by staking LP Tokens in the Farm.
when you stake your LP tokens in a farm to earn WECO, you're still providing liquidity to the liquidity pool, so you earn LP rewards as well!
The Farm Base APR is calculated according to the farm multiplier and the total amount of liquidity in the farm -- this is the amount of WECO distributed to the farm.
In the WECO/USDT pair above, we see these values:
Liquidity: $387.42M Volume 24H: $96.97M Volume 7D: 709.73M
- Calculate yearly fees
- Use the 24H volume to calculate the fee share of liquidity providers in the pool (based on the 0.17% trading fee structure): $96,970,000*0.17/100 = $164,849
- Next, use that fee share to estimate the projected yearly fees earned by the pool (based on the current 24h volume): $164,849*365 = $60,169,885
- We can now use the yearly fees to calculate the LP rewards APR: That's yearly fees divided by liquidity: ($60,169,885/$387,420,000)*100 = 15.53% LP reward APR