Liquidity providers who set a tighter price range will receive a higher share of fees and incentives but are more vulnerable to impermanent loss.
A New Era for DEXs and AMMs
Orca launch Whirlpools, concentrated liquidity pools that improve the protocol’s capital efficiency and swap prices.
The decentralized exchange (DEX) announced the new pools on April 25 via Twitter. Whirlpools are liquidity pools where liquidity providers earn a higher yield for providing liquidity for a token pair in a specific price range—instead of for any price. This way, users who use the exchange can enjoy an improved trading experience, as they enjoy more liquidity and better prices. However, the tighter the range, the higher the risk of impermanent loss for liquidity providers.
“Today, we’re officially opening up deposits to the entire Solana ecosystem. (Builders can also start integrating using the Whirlpools SDK!) We’re proud to achieve this key milestone on our journey to become an Apex AMM,” wrote the team in the announcement blog. “To celebrate the official launch, we’ll also be listing seven new Whirlpools, all with built-in Double-Dip rewards!”
Orca launched Whirlpools’ beta in March for Orcanaut NFT holders. The pools saw $10 million in total value locked (TVL) and $10 million in volume traded per day during the trial. Now, anyone can provide concentrated liquidity in 14 pools, which already reached over $12 million in TVL and offer up to 176% APR.
Last year, concentrated liquidity ushered in a new era for DEXs and Automated Market Makers (AMMs). Uniswap introduced the innovation in May 2021 with the release of version 3.0 of its famous Ethereum-based DEX. In V3, Uniswap devs departed from their open-source roots to avoid the duplication of the new feature on other platforms. According to Uniswap´s blog, concentrated pools offer up to 4000x capital efficiency relative to Uniswap v2.
Orca is attempting to offer an open-sourced version of the same technology but in Solana’s faster and cheaper environment.
What is Orca:
Orca is a DEX on Solana, designed “for people, not programs.” The Solana Foundation awarded the protocol a Wave One grant in 2020. Its recent introduction of liquidity pools and staking has increased its user proposition within the Solana ecosystem. In addition to exchanging tokens on the platform, users can also provide liquidity to the trading pool to earn a share of the trading fees.
Find more about Orca here:
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Source : web3wire.news
