Among the two product lineups, the CLMM segment is said to provide the following problems and solutions: ➡️ CLMM - Concentrated Liquidity Market Maker - Built around the fundamental concepts of concentrated liquidity and a model where LPs select a range to improve capital efficiency. ❗️ Problems CLMM addresses: - Capital efficiency: Liquidity is concentrated in meaningful price ranges, not across the entire price range. - Price/slippage structure: Trades are executed along a continuous curve, with price slippage occurring as trading volume increases. ➡️ Advantages/Tradeoffs - Thicker quotes can be created with the same TVL. - LPs must manage the range to maintain capital efficiency. - If prices deviate from the range, fee income can approach zero or become concentrated in a single asset. A single asset concentration due to price deviations from the range is a structural risk of concentrated liquidity. If these issues are improved through the AI roadmap, the protocol could become easier for even beginners to provide LP services.
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Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
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