Thread by @steakhut_fi

The Liquidity Book is here!

Trader Joe’s DEX V2 is an innovative new AMM model that is changing the way you swap your tokens on #Avalanche.

A 🧵on 🌊📘

The Liquidity Book V2 AMM brings concentrated liquidity to Avalanche’s top DEX, @traderjoe_xyz

With it comes a handful of innovative features that makes LPing profitable and introduces ZERO (0) slippage swaps🤯

DEX V2 has a number of innovations for LPs

1) Concentrated liquidity

2) Composable liquidity

3) Redesigned fees

1) Concentrated liquidity

Instead of supplying liquidity from 0-∞, liquidity is now concentrated in discretized bins.

Bins allow LPs to tightly concentrate liquidity, improving capital efficiency by up to 20,000x

#becausebins

The standard DEX V1 AMM design uses the function x*y=k to structure liquidity.

In LB each bin represents a constant price to which your liquidity can be concentrated.

✅ This makes liquidity MUCH more efficient and earns you higher rewards.

2. Composable Liquidity

LPs can structure liquidity across bins in endless ways to meet their goals.

This makes a number of strategies possible:

• Balanced
• Concentrated
• Volatile
• And even DCA and limit orders

https://twitter.com/steakhut_fi/status/1572571539303976961?s=20&t=E7JpUTyY_0rxXWPpsxaPQw

3. Redesigned fees

The Liquidity Book also introduces an innovative new concept to reward LPs and negate impermanent loss.

LPs will now receive:

1. Base fees

2. Variable fees

✅ This design aims to make LPing profitable without the need for token emissions.

Base fee:

Each time a user swaps tokens a base fee is rewarded back to liquidity providers.

The base fee will vary between pairs, as an example:

• Stablecoin pairs: 0.02%
• wBTC.e-BTC.b: 0.03%
• sAVAX-AVAX: 0.04%

This can be manually claimed by the LP.

Variable fees:

The variable fees increase LP rewards during volatile markets (when the risk of impermanent loss is highest)

Depending on the number of bins swapped and the time between transactions the volatility accumulator will increase fees up to a maximum threshold.

For users of the DEX, discretized liquidity means users can now execute 0 (ZERO) slippage swaps within bins.

✅ This makes The Liquidity Book the most efficient AMM on Avalanche.

If you've ever used a DEX you will likely be familiar with slippage when executing trades.

This is the price difference between the quoted price and the executed price, and it can have a significant impact on your trades.

The LB fixes this.

With DEX V2 a trade that is executed within the same bin will have 0 slippage since each bin acts as its own AMM with a constant price.

This allows for extremely efficient swaps, making The Liquidity Book an efficient route for your stables.

The Liquidity Book is now live and fully integrated into the @traderjoe_xyz DEX.

This innovation makes LPing profitable, increases efficiencies, and provides the lowest slippage DEX on Avalanche.

Congratulations to the Trader Joe team!