🫗V2: Concentrated Liquidity Pools
DragonSwap V2 brings Concentrated Liquidity Pools to the platform. This upgrade is designed to significantly improve capital efficiency for liquidity providers (LPs) by allowing them to focus their liquidity within specific price ranges. By concentrating liquidity in these key ranges, LPs can achieve deeper liquidity, reduce slippage, and potentially earn higher returns on their investments.
The Benefits of Concentrated Liquidity
Concentrated liquidity offers LPs more control over how their capital is allocated, focusing it within the price ranges where trading activity is most likely to occur. This is a significant departure from traditional liquidity pools, where capital is spread across the entire price range, including areas with little to no activity. By concentrating liquidity, LPs can optimize their positions, ensuring that their capital is actively contributing to deeper liquidity and more efficient trading.
One of the key advantages of this model is that LPs can achieve higher capital efficiency, meaning they can provide the same level of liquidity with less capital, or generate higher returns with the same amount of capital. The concentrated nature of this approach allows every unit of capital to work harder within the price ranges where it matters most.
Overview of the V2-Staker
DragonSwap V2 introduces the V2-Staker, a tool designed to distribute liquid rewards to optimize LP APR. The V2-Staker allows LPs to stake their liquidity positions, represented by NFTs, in specific pools to earn additional rewards.
How It Works:
Provide Liquidity: LPs supply liquidity to a trading pair on DragonSwap and receive an NFT representing their position.
Stake the NFT: This NFT can then be staked in a liquidity mining contract. The contract tracks the staked liquidity and calculates rewards based on the size of the position.
Earn Rewards: LPs earn additional tokens as rewards, determined by the amount of liquidity staked and the pool’s performance.
The V2-Staker is designed to maximize the potential returns for LPs, allowing them to generate additional rewards while maintaining control over their concentrated liquidity positions.
LP vs. Staked Positions
LP Position: This refers to the liquidity provided to a trading pair within a chosen price range. This liquidity is represented by an NFT, which allows LPs to earn trading fees based on activity within the price range they have chosen.
Staked Position: A staked position involves locking a single position into a staking contract. When LPs stake their positions they can unlock additional rewards on top of the standard trading fees.
How CL Rewards Work
In CL pools, managing rewards is straightforward, but there’s a key point to remember- swap fees aren’t claimable while your position is staked. To claim them, you need to unstake your position first. Once unstaked, you can access your earned fees.
For V2 positions with staked NFTs, your LP rewards continue to accrue but can only be claimed after unstaking. The process is simple: unstake, claim your rewards, and re-stake to continue earning. LP rewards continue to accumulate while staked, with only a brief 15-second window required for the unstake-claim-restake process.
Why Aren’t Fees Visible While Staked?
Fees aren’t visible during staking because your position is reallocated when you move DS tokens (or in this case the NFT) into a farm. Similar to xyk pools, the position will reappear once you unstake from the farm.
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