V3 Pool
Last updated
Last updated
Unlike the V2 pool, which supplies assets in all price ranges (0~∞), the V3 Pool supplies assets in a specific price range. Concentrated liquidity refers to a supply of assets in a particular range, and liquidity can only be utilized within that range. Fizzswap's primary driving force is the expansion of liquidity pools. As more assets (liquidity) are supplied into liquidity pools, more transactions occur, and as more pool usage fees are distributed to liquidity providers, more liquidity and suppliers will join the Fizzswap ecosystem.
However, the existing V2 pool was built with a CPMM model (Uniswap V2) based on x ∗ y = k, which supplies assets in all price ranges. This leads to a problem of 'low liquidity efficiency', where most supplied liquidity is not utilized for trading. As a result, Fizzswap's overall trading volume and pool usage fee profit ends up declining, weakening the users' motivation to provide additional liquidity.
The V3 Pool provides liquidity at a price level where transactions frequently occur so that the created liquidity can be used for a broader range of transactions. Making a considerable fee profit will increase rewards for Fizzswap ecosystem participants to be carried out more efficiently.
The following are the key features of Fizzswap's V3 pool.
V3 pool suppliers will receive 80% of the fee profit generated in the pool. The assets supplied in V3 pools are actively used for transactions, making it possible for suppliers to generate more profit.
By distributing these pool usage fee profits to suppliers, suppliers can reduce their chance of impermanent losses in liquidity supply.
Users can customize the price range for supplies. Users can also supply quickly and conveniently by choosing one of the three price ranges (Spot, Wide, Full range) provided by Fizzswap V3 pool. Price ranges of each type range from +n% to -n%, according to a parameter previously set by a contract.
A ‘price range’ represents the range of prices within which supplied assets can be traded, and when a transaction is conducted within that range, suppliers will receive their pool usage fees. Each price range has the following characteristics.
Characteristics of Spot, Wide, and Full price ranges
Suppliers can expect a higher pool usage fee profit if the price range is narrower, as the liquidity provided by users are more likely to be used for transactions.
Using the above method, Fizzswap V3 pool offers suppliers with no previous experience in providing V3 liquidity the convenience and flexibility to do so. Future updates will enable suppliers to customize their price range.
The Fizzswap V3 pool offers one-stop migration, allowing suppliers to migrate their assets with a single transaction. The detailed procedure consists of asset removal - supply in a new price range, and suppliers can migrate from the details page of the pool they provided liquidity for.
V3 pool aims to make the flow of liquidity capital within the ecosystem more efficient and dynamic. V3 pools will offer a more favorable trading environment, thereby enabling Fizzswap to secure a higher trading volume.
The V3 pool distributes 80% of the pool usage fee profit to V3 pool suppliers in order to continuously fill the pool with new liquidity. As a result of such a process, Fizzswap's TVL rises, creating a virtuous cycle, which ensures abundant liquidity, and generates more profit from pool usage fees based on that high TVL.
However, since tokens with large price fluctuations are supplied intensively in a narrow price range, it is necessary to continuously monitor the current token price to ensure that it stays within the supplied range. In such a case, the assets should be migrated to valid price ranges where the swap occurs. Furthermore, the more suppliers provide within a narrower price range, the more likely the token's price will change from the time of supply, causing the impermanent loss to increase(Please refer to.)
