V2 Concentrated Liquidity Pools

Swapsicle V2 introduces concentrated liquidity pools powered by Algebra Finance. Concentrated liquidity allows users to select the range in which their liquidity is supplied. If a user selects a specific range, the user will only earn a portion of swap fees when the price of the asset trades in the liquidity range selected. As of September 2023, Algebra Finance’s 2.0 Concentrated Liquidity is the most optimal form of concentrated liquidity allowing users many new features not seen in Uniswap V3. Some of these features include: Limit orders, dynamic fees, custom fees, and farms.

Concentrated Liquidity allows users to focus their liquidity on specific price ranges rather than spreading the liquidity across a price range of 0 to infinity. For example on an AVAX/USDC pair a user may select $15.05 - $20.75, this means if the price of AVAX is within that range, the user’s liquidity will be utilized to facilitate more trades which in turn leads to the user earning more of the transaction fees swapped within that price range. The user would not earn any fees if the price of AVAX is outside of that range.

Risk

Although users can potentially earn higher APRs with concentrated liquidity, Swapsicle recommends fully understanding the risks associated with concentrated liquidity prior to providing liquidity

To learn more about the mechanisms behind concentrated liquidity please visit https://docs.algebra.finance/en/ (opens new window)