V3 Pair Deposit
Last updated
Last updated
Unlike the V2 pair deposit, which deposits assets in all price ranges (0~∞), the V3 Pair Deposit deposits 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. KLAYswap's primary driving force is the expansion of liquidity pools. As more assets (liquidity) are deposited into liquidity pools, more transactions occur, and as more fees are distributed to liquidity providers, more liquidity and depositors will join the KLAYswap ecosystem.
However, the existing V2 pair deposit pool was built with a CPMM model (Uniswap V2) based on x ∗ y = k, which deposits assets in all price ranges. This leads to a problem of 'low liquidity efficiency', where most deposited liquidity is not utilized for trading. As a result, KLAYswap's overall trading volume and transaction fee profit ends up declining, weakening the users' motivation to provide additional liquidity.
The V3 Pair Deposit (V3) 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 KLAYswap ecosystem participants and allow securing financial resources to support KSP (buyback) to be carried out more efficiently.
The following are the key features of KLAYswap's V3 pair deposit.
While depositors of the V2 pair pool will receive a distribution of KSP rewards instead of pool transaction fees, the V3 pair depositors will receive 40% of the fee profit generated in the pool. The assets deposited in V3 pair pools are actively used for transactions, making it possible for depositors to generate more profit.
By distributing these transaction fee profits to depositors, depositors can reduce their chance of impermanent losses in liquidity supply. Further, KSP rewards are distributed to the V3 pool according to the KSP distribution policy, and more KSP rewards are rewarded to depositors based on active trading volume.
Users can customize the price range for deposits. Users can also deposit quickly and conveniently by choosing one of the three price ranges (Spot, Wide, Full range) provided by KLAYswap V3 pair deposit.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 deposited assets can be traded, and when a transaction is conducted within that range, depositors will receive their transaction fees. Each price range has the following characteristics.
Characteristics of Spot, Wide, and Full price ranges
Depositors can expect a higher transaction fee profit if the price range is narrower, as the liquidity provided by users are more likely to be used for transactions.
However, since tokens with large price fluctuations are deposited intensively in a narrow price range, it is necessary to continuously monitor the current token price to ensure that it stays within the deposited range. In such a case, the assets should be migrated to valid price ranges where the swap occurs. Furthermore, the more depositors deposit within a narrower price range, the more likely the token's price will change from the time of deposit, causing the impermanent loss to increase(Please refer to Price Range Fall Out and Migration.)
Using the above method, KLAYswap's V3 pair deposit offers depositors with no previous experience in providing V3 liquidity the convenience and flexibility to do so. Future updates will enable depositors to customize their price range.
The KLAYswap V3 pair deposit offers one-stop migration, allowing depositors to migrate their assets with a single transaction. The detailed procedure consists of asset withdrawal - deposit in a new price range, and depositors can migrate from the details page of the pool they provided liquidity for.
Connect Link: 2.2 V3 to V3 Migration Guide
Connect Link: 2.2 V3 to V3 Migration Policy
Compared to V2 pair deposits, V3 pair deposits provide depositors with higher transaction fee profit since deposited assets are more efficiently utilized for trading. Through the migration function, users already depositing assets in the V2 pair pool can also provide liquidity to the V3 pair pool. Depositors can easily migrate from the detail page of the V2 pool. Migration deposits assets with a single transaction consisting of withdrawing assets from the V2 pair pool to depositing in the V3 pair pool.
Connect Link: 2.2 V3 to V3 Migration Guide
Connect Link: 2.2 V3 to V3 Migration Policy
KLAYswap already has the largest liquidity and ecosystem participants in the Klaytn ecosystem. And KLAYswap’s goal is to migrate liquidity and participants to V3 to improve the efficiency and dynamics of the ecosystem's liquidity.
Concentrated liquidity provides a more favorable environment for users, leading to KLAYswap doubling its existing trading volume. With this explosive growth in transaction fees, KLAYswap will be able to enhance the value of KLAYswap, ecosystem participants, and KSP value.
The V3 pair deposit pool distributes 40% of the transaction fee profit to V3 pair depositors in order to continuously fill the pool with new liquidity. As a result of such a process, KLAYswap's TVL rises, creating a virtuous cycle, which ensures abundant liquidity, and generates more profit from transaction fees based on that high TVL.
Based on KSP Tokenomics, a V3 pair pool distributes 30% of the profit generated to pool voters as rewards. Therefore, not only V3 pair depositors but also KSP staking participants (vKSP holders) can obtain more expanded rewards.
The remaining 30% of the transaction fee profit from the V3 pair pool is used to buy back KSPs. With the expansion of KSP buy-backs, inflation will be stabilized, which will increase KSP value and ultimately lead to an increase in demand for holding KSPs.
