Skip to main content

Staking LP-Token

In general, liquidity token serve as the wildcard used to secure cryptocurrency over the DEX. LP-token work like a coupon or a receipt (i.e. an “I owe you” or IOU), allowing Liquidity Providers (LPs) to reclaim their funds. In other words, the LP-token represents a voucher.

LPs receive LP-token when allocating cryptocurrency (i.e. ETH) together with PL2 to the liquidity contract on the Sushi V2 DEX using Arbitrum One (Ethereum L2). LP-token is minted when joining and burned when withdrawn. Corresponding rates are always proportional to the contribution made.

LPs earn a fee from the AMM-protocol for the transactions executed through the liquidity contract on the DEX. In addition, LPs are incentivized for staking corresponding LP-token on the Dapp.

In the case of Ether, wrapped Ether is utilized and the currency pair is denominated as WETH/PL2. Since Plenny's liquidity staking contract is linked to the liquidity contract on the Sushi using Arbitrum, the liquidity token is explicitly referred to as SLP. However, on the Dapp the LP-token is displayed as "SLP-PL2" to indicate the value is linked to Plenny.

Simply put, the amount of SLP-PL2 represents the value of the funds put into the liquidity staking contract on the DEX that are then used for further staking on Plenny in exchange for rewards. This event is referred to as “Fish Farming” and occurs via the Dapp on a non-custodial basis using the Peer-to-Contract model (P2C). In short, LPs receive LP-token on the DEX for staking via the Dapp and are eligible for periodic rewards paid in PL2.

Rewards due for “Fish Farming” represent a percentage of the Reward HODL in proportion to an LP’s weight and the total weight. The LP’s weight is calculated by the number of SLP-PL2 staked with an additional multiplier based on the staking duration. This formula measures the share of the LP dynamically in relation to the total amounts in the Reward HODL. To prevent dethroning, LPs must manually collect rewards after every distribution period, or increase the amount of staked tokens.