A brief reasoning of why we need #CLMM🔥
There are some key points you get to know about how #Cetus reinvents the DeFi game on #Aptos and #Sui via CLMM👇
There are some key points you get to know about how #Cetus reinvents the DeFi game on #Aptos and #Sui via CLMM👇
1/ Concentrated liquidity is a type of programmable liquidity.
Concentrated Liquidity Market Maker(CLMM) allows liquidity providers to set their custom price ranges when they add liquidity, so as to enhance capital utilization.
Concentrated Liquidity Market Maker(CLMM) allows liquidity providers to set their custom price ranges when they add liquidity, so as to enhance capital utilization.
2/ In the past, most DEX platforms used the common AMM models (Automated Market Maker) to serve users’ daily trading demands following a simple x*y=k formula where they can provide liquidity permissionless
3/ AMM dominated the market for quite a long time. Users can create a market on Uniswap and other AMMs easily. It’s fair to say that AMM is the beginning of everything we have today in DeFi.
However, soon people noticed issues...
However, soon people noticed issues...
4/ One of the biggest pain points is AMM’s extremely low capital utilization. Only a slight fraction of the liquidity near the current price can be actually utilized, which leads to...
5-1/ The transaction fee revenue of LPs (liquidity providers) in AMM is LOW.
The liquidity is seriously diluted in AMM pools and there is a lot of idle capital in those price ranges that are rarely traded.
The liquidity is seriously diluted in AMM pools and there is a lot of idle capital in those price ranges that are rarely traded.
5-2/ Token incentives are extremely inefficient in the AMM model.
Most of the farming budget is wasted on inactive liquidity.
Most of the farming budget is wasted on inactive liquidity.
5-3/ The token price in an AMM pool usually experiences sudden pump and dump,
because it’s quite easy for a whale to create a significant price impact on the pool.
because it’s quite easy for a whale to create a significant price impact on the pool.
6/ Then the concept of CLMM was developed to address these issues.
With the CLMM, LPs can optimize their transaction fee revenue by selecting their preferred price range, often choosing to add liquidity in a more active price range close to the current market price.
With the CLMM, LPs can optimize their transaction fee revenue by selecting their preferred price range, often choosing to add liquidity in a more active price range close to the current market price.
7/ For example, when the current $APT price is ~$14, LPs may choose to concentrate their liquidity within the range from $8 to $20.
In this way, their liquidity is more likely to be utilized by ongoing orders, so they can earn fees much faster than before.
In this way, their liquidity is more likely to be utilized by ongoing orders, so they can earn fees much faster than before.
8/ Now, on L1s and L2s such as Ethereum, Polygon, and Solana, #CLMM handles a dominant portion (~70%+) of daily Txs
It’s inevitable that CLMM will play a key role in #Aptos and #Sui for their underlying liquidity.
#Cetus aims to take the lead in this trend🔥🚀
It’s inevitable that CLMM will play a key role in #Aptos and #Sui for their underlying liquidity.
#Cetus aims to take the lead in this trend🔥🚀
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