Yield Farms allow users to earn POSI while supporting Position Exchange by staking LP Tokens.
Yield farming can give better rewards than the classic Pools, but it comes with a risk of Impermanent Loss. It’s not as scary as it sounds, but it is worth learning about the concept before you get started.
Yield Farm APR calculation includes both the rewards earned through providing liquidity and rewards earned staking LP Tokens in the Farm.
Previously, rewards earned by LP Token-holders generated from trading fees were not included in Farm APR calculations. APR calculations now include these rewards, and better reflect the expected APR for Farm pairs.
Below is a basic explanation of how APR is calculated.
Let's take this as example. Imagine the POSI/BUSD stats are as follow:
Liquidity: $15M Volume 24H: $5M Volume 7D: 35M
To calculate the APR, first we take the 24hour volume, $5,000,000, and calculate the fee-share of LP-holders, 0.17% [$5,000,000*0.17/100 = $8,500].
Next, we estimate the yearly fees based on the 24h volume [$8,500*365 = $3,102,500].
Now we can calculate the fee APR with yearly fees divided by liquidity [($3,102,500/$15,000,00)*100 = 20.68%].
With the fee APR, we can add the fee APR (20.68%) and the Farm staking APR (20.08%) to get the new total APR [20.68%+20.08% = 40.76%].