Concentrated Liquidity Explained
The Dual Asset DEX and Single Asset DEX strategy vaults route and actively manage vault deposits in underlying SaucerSwap V2 (decentralized exchange) pools, called concentrated liquidity pools. Found below is an explanation of how concentrated liquidity pools work.
What Is Concentrated Liquidity On Decentralized Exchanges?
Traditional automated market makers (AMMs) like SaucerSwap v1-style pools spread liquidity across all prices from 0 → ∞. Liquidity suppliers earn trading fees, but most of their capital "sits" where the market never trades.
Concentrated Liquidity (SaucerSwap v2-Style Pools) Changes This:
Instead of liquidity existing everywhere, the liquidity supplier chooses a price range (a band) where their liquidity lives.
Inside that band, their liquidity is “thicker,” so they earn more fees per dollar of capital.
If the market price moves outside of their band, the liquidity goes out of range and stops earning fees.
Concentrated Liquidity is Powerful but Introduces Two Problems for Users:
The user has to decide a range, and keep adjusting / maintaining it manually as the price moves — if they don't, the user misses out on potential yield earnings and may experience impermanent loss.
Positions are represented as NFTs, with custom interfaces rather than simple “fungible LP tokens".
The Dual Asset DEX vault strategy exist to solve exactly this: let liquidity providers tap into higher yield opportunities offered by concentrated liquidity pools, while the vault strategy automatically handles range management and rebalancing.
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