SaucerSwap | Leading Crypto

SaucerSwap is an automated market maker based on Uniswap V3, adapted to work with the Hedera Token Service. It allows liquidity providers to allocate capital within specific price …

SaucerSwap

Concentrated Liquidity

The hallmark feature of SaucerSwap V2 is its implementation of concentrated liquidity, allowing liquidity providers (LPs) to allocate capital within specific price ranges. Unlike in V1, where liquidity is uniformly distributed across all possible prices (0, ∞), V2 enables more efficient use of capital.

Key advantages include:

• LPs have the capacity to provide liquidity with up to 4,000x capital efficiency in comparison to SaucerSwap V1, thus receiving elevated returns on their capital.

• Capital efficiency allows for trades to be executed with greatly reduced price impact in comparison to both centralized exchanges and stablecoin-focused AMMs.

• LPs have the opportunity to increase their exposure to desired assets and mitigate their downside risk.

• LPs have the ability to trade one asset for another by depositing liquidity into a price range entirely above or below the current spot price, emulating a fee-earning limit order that executes along a smooth curve.

Take stablecoin pairs as an example. In SaucerSwap V1, much of the liquidity between tokens like USDC and USDT is often idle due to the broad price range over which liquidity is distributed. With V2, an LP can concentrate their capital within a tight range, say, 0.995 to 1.005 USDC/USDT, which can result in a more efficient utilization of their capital and higher fee earnings.

In SaucerSwap V2, liquidity can become inactive if the spot price moves out of the set price range. This is in stark contrast to V1, where the liquidity is always active but often underutilized. When the spot price re-enters an LP’s range, their liquidity is once again utilized, and will resume earning fees.

The flexibility of setting multiple positions means LPs can adapt to market conditions more effectively, concentrating their liquidity where it's most likely to be utilized, maximizing fee earning potential.

SaucerSwap V2 inherits the Uniswap V3 concept of "ticks," partitioning the continuous price range into discrete intervals. Each tick signifies a 0.01% change in the price, and LPs must select upper and lower ticks to define their position's boundaries. As swaps occur and the spot price (i.e., active tick) changes, liquidity will be activated or deactivated according to these ticks.