Concentrated Liquidity FAQ
Unlike V2 pools, LP(Liquidity Provider)s of V3 pools may earn different yields (APR) even if they provided liquidity to the same pool. Due to the structure of Concentrated Liquidity and Leverage, users who set a tighter price range around the current token price will receive a higher share of fees and incentives. On the other hand, they are more vulnerable to IL (Impermanent Loss).
In a V2 DEX, liquidity providers receive LP tokens representing their stake in the pool. All LPs supply liquidity over the entire price range (0 to infinity), and the only difference between LPs is “how much liquidity has been provided.” Therefore, the positions of LPs are in a fungible relationship with each other, and LP tokens are issued as ERC20 standard Fungible Tokens.
In the Zeus Swap (V3 DEX), each LP provides liquidity to different price ranges. There are two differences between LPs: “in which price range the liquidity was provided” + “how much liquidity was provided.” Therefore, the positions of LPs are in a non-fungible relationship with each other, and LP tokens are issued as Non-Fungible Tokens (NFT) according to the ERC721 standard.
Zeus NFT is an LP token that represents the liquidity position of liquidity providers.
Zeus NFT is designed to be transactable and transferable. When ownership is changed after NFT is transferred/sold, the ownership of the liquidity and the fee of the position is also transferred, so caution is required.
When all liquidity is withdrawn, the Zeus NFT for the position will be burned.
The Min. Price and Max. Price mean the price range in which the liquidity position is used, and the "Fee Boost" means how many times the return can be expected compared to the V2 pool when a swap is made in the price range.
* Due to the technical nature of Price Tick, a range of approximations may be established.
Users can set custom price ranges according to their preferences. Factors to consider when setting up a custom price range include: how often to check and adjust positions, frequency in which they wish to check their position, confidence in price movement, expected token volatility, and preferred exposure to risk. Users who want to check and manage their positions more frequently can provide liquidity to a more concentrated price range, rebalance their positions in response to price changes, and maximize profits.
As users swap tokens against a given pool, the price of the token pair in the pool and the balance of tokens in the pool will change continuously. Zeus Swap's pool works in a similar way, but only when the price is within the position’s price range.
If the price of token A moves above the established limit, all of the A tokens will have been sold for token B. If the price of token A moves below the established limit, all of the B tokens will have been sold for token A.
In this way, if the price is out of range, the user holding the position will no longer be able to provide tokens to be used for swap and will not be able to earn swap fees. When the price returns to the position's range, the liquidity of the position is activated to be used for the swap and the LP will start to earn swap fees again.
After the token pair's price leaves the LP position's price range, the user must decide whether to wait for the price to return to the original price range or provide liquidity to a new price range.
In order to supply liquidity to the new range, users must rebalance their position by withdrawing their existing position and make a new one by providing liquidity to a different price range. If the price of the pool is out of the price range of the position, only one of the A/B assets will remain, so an asset swap would be necessary to provide liquidity to the new position.
No. The more liquidity is concentrated, the larger the amount of IL generated when the price changes. However, as liquidity is concentrated, the amount of swap fee that LPs can receive increases proportionally. It is up to the individual to decide how much liquidity to concentrate on.
The deposit ratio of Zeus Swap's position depends on the price range(From Min. Price to Max. Price) of the liquidity position. Under the premise that liquidity is provided in the range including the current price, the greater the difference between the range of [Minimum price ~ Current price] and the range of [Current price ~ Max price], the greater the ratio of deposited assets will be away from 50/50 .
It is determined by three factors: Current price (P = Px/Py), Min price(Pmin), Max price(Pmax). The ratio of the two assets deposited is calculated differently according to the price range.
The Metis network provides 200x faster transaction per second (TPS) than Ethereum and a low gas cost environment. In addition to those, Zeus Swap has the following advantages :
- A simpler and more optimized UI for concentrated liquidity
- 100% open source without copyright restrictions
- Rewards for deploying liquidity
Zeus Swap's liquidity pool has a built-in rewards feature to provide LPs with incentives other than swap fees. Anyone can freely add rewards.
The rewards added to the pool will be distributed to Price Ticks linearly in proportion to the time spent in each Price Tick. LPs will receive the rewards distributed to the ticks that they provided liquidity to in proportion to their liquidity share in the tick.
90% of the swap fee received goes to the LPs, and the remaining 10% is goes to the Treasury
The first tip is to decide whether you’d like to track PnL (profit & loss) in terms of the tokens themselves or relative to USD. Then, keep track of the values of the tokens during your initial deposit (if you did not do this, look for your deposit transaction using a blockchain explorer). You will also need to keep track of the yield harvested and any further deposits. Providing you have this data, the formula to calculate your PnL (Profit and Loss) is fairly simple :
PnL = Final Value of Position + Accumulated Fees and Rewards - Initial Value of Position
Disclaimer: The content of this communication is not financial advice and should not be relied on by any persons as financial advice. This communication has not been provided in consideration of any recipient’s financial needs. We have not conducted any financial assessment based on the personal circumstances of any recipients. Before using the protocol, carefully review all relevant documentation and consider risks, including total loss of funds.