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Price Range & Liquidity Shape
Uniswap V3 pioneered the concept of "concentrated liquidity" where users can specify a price range they want to provide liquidity to. This means instead of all user LP positions receiving a share of trading fee every time an AMM swap occurs regardless of asset price, the LP position will be active and earn trading fee only when the asset price is in a selected price range. Trader Joe V2 has also implemented this concept.
In the integration with Uniswap V3 and Trader Joe V2, Stella Strategy simplifies the process of providing liquidity by creating 3 different instant price ranges: Wide, Medium and Narrow. Each price range has different minimum and maximum asset price resulting in different risk and return within the same strategy. The more narrow range will be more likely to earn higher trading fees but can potentially experience more ‘Impermanent loss’ when an asset price moves.
Trader Joe's Liquidity Book offers users opportunities to provide liquidity with higher levels of flexibility and customization. Users will be able to deploy liquidity in a shape that fit their strategic goals to the capital efficiency. Stella users can provide liquidity in either Spot or Curve shape. Each shape serves different purpose for different market condition and has different risk level.
Last modified 3mo ago