💧Concentrated Liquidity

A Groundbreaking Liquidity Solution

Introducing Concentrated Liquidity

Concentrated liquidity is a novel approach to liquidity provisioning in the realm of Automated Market Makers (AMMs). It empowers liquidity providers (LPs) to maximize capital efficiency and mitigate impermanent loss by focusing their liquidity within a specific price range. This innovative feature allows LPs to stake a specific token pair within a defined price range, resulting in higher returns and improved trading experiences for both LPs and traders.

For Liquidity Providers

Capital Allocation Flexibility LPs can allocate their capital to preferred price intervals, consolidating their funds to earn more fees and use liquidity more efficiently.

Maximized Returns Concentrated liquidity positions enable LPs to generate higher returns, as they focus their liquidity on specific price ranges with higher trading activities.

For Traders

Deeper Liquidity Traders benefit from deeper liquidity when and where it's most needed, reducing the chances of encountering substantial price slippage.

Reduced Slippage By utilizing concentrated liquidity, traders experience reduced slippage, resulting in better execution prices for their trades.

Illustrative Example

To illustrate the advantages of concentrated liquidity, let's consider Andrew and David, both interested in providing liquidity in an ETH/USDC pool on the Throne v3 platform, each with $1 million.

Andrew chooses to distribute his capital across the entire price spectrum, depositing 500,000 USDC and 307.9 ETH, totaling $1 million.

David, on the other hand, decides to create a focused position within the price range of $1,000 to $2,250. He deposits 66,750 USDC and 45.5 ETH, amounting to around $133,500, while investing the remaining $866,500 elsewhere.

Despite Andrew contributing 7.5 times more capital than David, they earn the same amount of fees as long as the price of ETH/USDC stays within the $1,000 to $2,250 range.