> For the complete documentation index, see [llms.txt](https://paragon-protocol.gitbook.io/paragon-protocol/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://paragon-protocol.gitbook.io/paragon-protocol/core-products/yield-farming.md).

# Yield Farming

Paragon Farms allow users to earn rewards by providing liquidity and staking LP tokens.  Farming combines trading activity, emissions, and execution-based incentives into a unified reward system.

### What You Earn

When farming on Paragon, rewards come from three sources:

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#### 1. LP Trading Fees

Every swap generates a fee:

* **0.20% base fee**
* **0.17% → LPs**
* **0.03% → Protocol (POL / treasury)**

👉 You earn:

* proportional to your share of the pool
* continuously as trades occur

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#### 2. Farm Rewards (XPGN Emissions)

Paragon distributes XPGN emissions to active farms.

**Key points:**

* emissions are focused on core pools (e.g. XPGN / USDT)
* rewards are distributed to liquidity providers
* emission direction is controlled by veXPGN governance

📌 See **Tokenomics** for full emission details

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#### 3. Execution-Based Rewards

When trades are routed through Paragon’s execution layer, pools used in routing may receive additional rewards.

👉 Key points:

* rewards depend on actual usage
* not all trades generate additional rewards
* varies based on execution conditions

📌 See **Surplus & Rebates** for full mechanics

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### The Paragon Yield Model

Paragon separates value into three layers:

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#### 🌱 Emissions (Growth)

* XPGN distributed to farms
* incentivizes liquidity and participation

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#### 💸 Fees (Value Capture)

* protocol share of trading fees
* used for buybacks and Protocol-Owned Liquidity

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#### ⚡ Execution (Efficiency)

* improved routing can generate additional value
* shared across participants

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👉 Result:

A system combining growth, sustainability, and activity-driven rewards.

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### Example (Simplified)

You provide liquidity to **XPGN / USDT**.

You may earn:

* LP trading fees
* XPGN farm rewards
* additional rewards when your pool is used in execution

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### ⚠️ Impermanent Loss (IL)

Liquidity providers may experience Impermanent Loss:

* caused by price divergence between tokens
* may reduce value compared to holding assets separately

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**Offset by:**

* trading fees
* emissions
* additional rewards (when applicable)

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### How Rewards Are Paid

**LP Fees**

* accumulate in the pool
* realized when liquidity is removed

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**XPGN Emissions**

* distributed continuously
* claimable via the Farms interface

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**Execution-Based Rewards**

* generated based on routing usage
* claimable depending on implementation

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### veXPGN (Governance Layer)

Locking XPGN into veXPGN allows users to:

* influence emissions
* participate in governance
* align with long-term protocol growth

📌 See **veXPGN (Locking & Power)** for details

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### Current Parameters

* base fee: **0.20%**
* LP share: **0.17%**
* protocol share: **0.03%**
* emissions: focused on core pools

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### ⚠️ Risks

* Impermanent Loss
* variable APR (depends on volume and emissions)
* emissions may change via governance
* execution-based rewards depend on usage

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### FAQ

**Where do emissions go?**\
→ Core farms and ecosystem incentives

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**Are fees distributed as rewards?**\
→ LPs earn trading fees; protocol share is used for treasury functions

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**Can I unstake anytime?**\
→ Yes, unless a specific pool defines additional conditions

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### Summary

Paragon Farming combines:

* trading fees
* emissions
* execution-based incentives

It is designed to align rewards with actual protocol activity rather than relying solely on inflation.