Liquidity Provision (LP)

Platform

Concentrated Liquidity

Impermanent Loss

Integral

As efficient as Uniswap V3

0%

Uniswap/Sushiswap

-

V2 is ~20%; V3 has amplified IL on closer price range to spot

A more detailed explanation on LP Risk & Returns

High Fee APY

We require only 1/10 the AUM in order to provide the same level of liquidity. So given the same trade volume, our LPs earn 10x more Fee APY.

Mean-zero Impermanent Loss

LPs suffer from Mean-zero Impermanent Loss. This means that IL will oscillate around 0. Sometimes IL will be negative, making it more profitable to put asset into the pool than holding it in your wallet. In the long run, IL will converge to 0.

This is made possible with the built-in Uniswap oracle and trade delay mechanism. They will eliminate any frontrunning/cross-exchange arbitrageurs.

What's the catch for LPs? Cyclical Imbalance (this is a necessary side effect of concentrated liquidity).

In order to achieve concentrated liquidity, our pool ratio will fluctuate cyclically around 50/50. LPs are incentivized to bound it between 40% and 60% at all times.

Cyclical imbalance does not affect long-term LPs. Given enough time, you will almost surely see the pool ratio revert to your initial ratio, with no loss.