Simple Guide to the LOAN Staking Pool (Where Does The Yield Come From?!)

If you like DeFi, then you love earning on-chain yield without having to give away your private keys.

The Liquid Loans protocol provides just that with a way to earn $PLS and $USDL by staking LOAN token.

Read on to learn everything you need to know about the LOAN Staking Pool.

What is the LOAN Token?

The LOAN Token is the secondary token created by the Liquid Loans protocol. When staked, it captures the fees generated by the protocol.

Users can currently obtain LOAN token in 3 different ways:

1. Deposit USDL:PLS LP Tokens from PulseX into the LP Rewards pool on Liquid Loans
2. Deposit USDL into the Stability Pool to become a Stability Provider
3. Buy LOAN from an exchange

What is the LOAN Staking Pool?

The LOAN Staking Pool is a smart contract in which users can deposit LOAN tokens to earn the fees generated from the protocol.

The yield generated from the LOAN Staking Pool comes from 2 sources:

1. The Borrowing Fee. Anytime a user mints USDL by collateralizing PLS, they pay a fee of 0.5-5% in USDL. This USDL is distributed to the stakers in proportion to their share of the pool.
2. The Redemption Fee. Anytime a user redeems their USDL for PLS, they pay a fee of 0.5-5% in PLS. This PLS is distributed to the stakers in proportion to their share of the pool.

The LOAN Staking Pool is permissionless and admin key free. Holders of LOAN token are not required to stake and stakers can remove their LOAN token at any time. 

How To Stake LOAN Token in the Staking Pool (Step By Step)

This section applies to PulseChain Testnet v4, once Liquid Loans is live on Mainnet, this guide will be updated. 

After you have obtained LOAN token:

1. Go to https://testnet.liquidloans.io/#/ and connect your wallet. 
2. Choose “Staking Pool” from the left sidebar
3. Choose the amount of LOAN token you want to stake and click confirm
4. Monitor your stakes performance

How Much Can You Earn from the LOAN Staking Pool?

Earning from the LOAN Staking Pool depend on a variety of factors:

1. Value Borrowed or Redeemed. The more USDL that users borrow, and the more PLS that users redeem, the more fees will be generated.
2. The Fee Rates. While the redemption and borrowing fees are usually 0.5%, they can increase to as high as 5%. If the rates are higher, then the size of the rewards for the stakers will be higher as well.
3. Your Share in the Pool. If you have 100% of the LOAN token in the staking pool, you will get 100% of the fees generated by the protocol. If you have 0%, then you will get 0% of the fees.