How to Farm

Farming on Pharaoh means providing liquidity to a pool and earning potential rewards from trading fees, PHAR emissions, and other incentives when available.

What is Farming?

Liquidity providers make trading possible. When users swap through Pharaoh, they trade against liquidity supplied by LPs. In return, LPs can earn a share of swap fees from the pools they support. Some pools may also receive PHAR emissions through Pharaoh's gauge system, depending on how xPHAR voters direct emissions each epoch.

Farming can be rewarding, but it also carries risk. Liquidity positions are affected by price movement, market volatility, pool activity, emissions, range selection, and impermanent loss.

Getting Started with Farming

Difference between legacy liquidity and concentrated liquidity

Pharaoh supports different liquidity models. The two main types users should understand are legacy liquidity and concentrated liquidity:

• Legacy liquidity - Your liquidity is spread across the full price curve of the pool. This can be easier for users who want broader exposure and less active management.
• Concentrated liquidity - You choose a specific price range where your liquidity will be active. Instead of spreading capital across every possible price, you concentrate liquidity around the range where you expect trading to happen.

Concentrated liquidity can be more capital efficient because your liquidity is focused where it is most likely to be used. The tradeoff is that it requires more active management. If the market price moves outside your selected range, your position may stop earning trading fees until the price moves back into range or you adjust the position.

Legacy liquidity is generally simpler. Concentrated liquidity can offer more control and efficiency, but it requires more attention.

Choosing a pool

The first step in farming is choosing which pool to support. Pools differ by token pair, liquidity depth, trading volume, fee tier, incentives, volatility, and risk. A pool with high trading volume may generate more fees, but that does not automatically make it the best choice. A pool with high emissions may look attractive, but emissions can change from epoch to epoch based on xPHAR voting.

Before choosing a pool, consider:

• Whether you understand both assets in the pair
• How volatile the pair is
• How much liquidity the pool already has
• Whether the pool has an active gauge
• Whether the pool receives PHAR emissions
• Whether there are active vote incentives
• How much trading volume the pool has
• Whether you are comfortable holding more of either token if prices move

Selecting a fee tier

Some pools may offer multiple fee tiers. A fee tier determines how much traders pay when swapping through that pool.

• Lower fee tiers are often better suited for highly liquid or closely correlated pairs where traders expect tight execution.
• Higher fee tiers may be more appropriate for volatile or less liquid pairs where LPs take on more risk.

Fee tier selection matters because it affects both traders and LPs. Traders usually prefer lower fees and deeper liquidity. LPs want enough trading activity and fee revenue to justify the risk of providing liquidity.

When selecting a fee tier, consider the behavior of the token pair. If the assets tend to trade closely together, a lower fee tier may attract more volume. If the assets are volatile, a higher fee tier may better compensate liquidity providers for risk.

Choosing a range

If you are using concentrated liquidity, you will need to choose a price range.

Your range determines where your liquidity is active. If the market price stays inside your selected range, your position can earn trading fees from swaps that use your liquidity. If the price moves outside your range, your position becomes inactive and stops earning trading fees until the price returns to the range or you adjust your position.

• Tighter range - Concentrates your liquidity more aggressively. This can increase fee earning potential while the price remains in range, but it also increases the chance that your position moves out of range.
• Wider range - Gives your position more room to stay active, but spreads your liquidity across a broader price area. This can reduce capital efficiency compared to a tighter range.

There is no perfect range for every user. Range selection depends on your market view, risk tolerance, management style, and the volatility of the pair.

Before choosing a range, ask yourself:

• How much can this pair move?
• Am I willing to manage this position actively?
• What happens if the price moves out of range?
• Would I be comfortable ending up with more exposure to one token?
• Am I choosing this range because it makes sense, or only because the projected APR looks high?

Managing Your Position

Depositing token assets

Once you choose a pool and, if needed, a range, you can deposit the required tokens.

Most liquidity positions require two assets. The exact amount of each token depends on the current pool price and the type of position you create. For concentrated liquidity, your selected range also affects how much of each token is required. If your range is above or below the current market price, the position may require mostly one asset.

Review deposit amounts carefully before confirming. Make sure you are depositing the correct tokens into the correct pool. Pharaoh and your wallet will guide you through the required transaction flow, which may include token approvals before the deposit can be completed.

After the deposit transaction confirms, your liquidity position will be created. Depending on the pool and farming setup, you may also need to stake the position in a gauge to earn emissions.

Staking LP position in a gauge

Creating a liquidity position and farming with that position may be separate steps.

A liquidity position allows your assets to support trading in the pool and earn applicable swap fees. A gauge is where eligible liquidity positions can be staked to earn PHAR emissions or other rewards.

If a pool has an active gauge, you may need to stake your LP position into that gauge to receive emissions. If you do not stake the position, you may still have liquidity in the pool, but you may not earn gauge-based rewards.

Before staking, confirm:

• The pool has an active gauge
• Your LP position is eligible
• You understand the reward structure
• You know how and when rewards can be claimed
• You understand whether unstaking is required before removing liquidity
• You have reviewed all wallet prompts before approving the transaction

Gauge rewards can change each epoch based on xPHAR votes, total liquidity, emissions, trading activity, and incentives.

Tracking APR, emissions, and rewards

After your position is active, monitor its performance.

APR is an estimate, not a guarantee. It can change as trading volume, pool liquidity, emissions, token prices, and voter behavior change. A high displayed APR may decrease as more liquidity enters the pool or as emissions move to other gauges.

Emissions are distributed based on gauge votes. xPHAR voters direct PHAR emissions toward selected pools during each epoch. If a pool receives more votes, it may receive more emissions. If votes move elsewhere, emissions may decrease.

Rewards may come from several sources, depending on the pool:

• Swap fees
• PHAR emissions
• Vote incentives
• Other pool-specific incentives, if available

Use the Pharaoh dashboard to review pools, monitor your positions, check claimable rewards, and compare available farming opportunities. Dashboard data can help inform decisions, but displayed APRs and estimates are dynamic. They should not be treated as guaranteed future returns.

Managing or removing liquidity

Liquidity positions are not always set-and-forget. This is especially true for concentrated liquidity positions.

If market conditions change, you may want to adjust your range, add liquidity, remove liquidity, claim rewards, or move to another pool. If your position moves out of range, it may stop earning trading fees until the price returns or the position is updated.

To remove liquidity, you may first need to unstake your LP position from a gauge. Once unstaked, you can remove some or all of your liquidity from the pool.

When removing liquidity, the tokens you receive may not match your original deposit amounts. This is normal. AMM positions change composition as prices move. Depending on market movement, you may receive more of one token and less of the other.

Before removing liquidity, review:

• Whether the position is currently staked
• Any unclaimed rewards
• Current token balances in the position
• Current pool price
• Gas costs
• Whether you want to remove the position fully or partially

Understanding Impermanent Loss

Impermanent loss is one of the main risks of providing liquidity.

It happens when the price of the tokens in your liquidity position changes compared to simply holding those tokens in your wallet. As trades happen, the pool automatically adjusts the balance of assets in your position. If one asset rises or falls significantly relative to the other, your LP position may underperform a hold-only strategy.

The loss is called "impermanent" because it can change if prices move back toward their original relationship. But it can become permanent if you remove liquidity while the position is at a disadvantage compared to holding.

Concentrated liquidity can increase this risk because your capital is focused inside a specific price range. A tighter range may earn more fees while active, but price movement can also change your position more aggressively.

Fees and emissions can help offset impermanent loss, but they do not eliminate it. Always consider whether the expected rewards justify the risk of holding the pair as an LP position.

Farming Risks to Understand

Farming can involve several types of risk. Understanding these will help you make informed decisions:

Impermanent loss - Can cause your LP position to underperform a hold-only strategy.

Out-of-range liquidity - Can stop earning trading fees in concentrated liquidity positions.

APR changes - Can happen quickly as emissions, liquidity, trading volume, and token prices change.

Emissions are not guaranteed - May shift from one pool to another based on xPHAR voting.

Token volatility - Can affect both the value of your deposit and the value of your rewards.

Smart contract risk - Exists whenever using DeFi protocols. Only deposit what you are prepared to risk.

Token approval risk - Exists when approving contracts to use tokens from your wallet. Review approvals carefully before signing.