How Crescent solves liquidity inefficiency

Most often, liquidity is acquired through promise of high reward yield. But we ask, at what cost?

In a basic AMM, the liquidity within a pool is distributed from zero to infinity, but the highest trading volume takes place within a relatively narrow price range. Then why do networks forcibly lock users’ assets when they are not being put to use for trading?

Users are forced to lock assets within a pool, unable to effectively expand their investment positions, and DEXs attract users with high APR that are unsustainable for the network, which leads to fleeting liquidity. High liquidity providing APR within a pool means high inflation for farming rewards, which is not a sustainable method in the long-term.

The mission of Crescent Network goes beyond basic AMM, complementing the strengths of a DEX, while ensuring the longevity of the network through a method of securing sustainable liquidity that allows for smooth trading.

Problem:

Existing basic AMM — inefficiently distributes liquidity among entire price range between zero and infinity

  • Most of the liquidity within the pool is not utilized for trading

Solution:

Ranged Liquidity — Allows for efficient utilization of liquidity

  • By providing liquidity within a finite range of the current price, the network can supply the same liquidity within the range as the basic pool with infinite range, resulting in the same trading experience for users

Advantages for the network’s longevity

  • By utilizing orderbook and ranged liquidity, inefficient allocation of farming rewards is negated by focusing liquidity on proper price ranges with high volume

Example:

  • Currently, the bCRE/CRE ranged pool has the daily farming rewards of 4,684 CRE for the liquidity of $357k.

In the perspective of the Liquidity Provider

  • Liquidity providers can receive farming rewards with only a portion of liquidity provided compared to basic pools allows users to maximize capital efficiency

In the perspective of the trader

  • Having liquidity focus in price ranges of high volume means traders are able to swap with alleviated slippage

Active Reward Focusing

  • The inflation of allocated farming rewards is highly wasted in AMM pools, distributing inefficiently to prices that do not have volume. A large amount of farming incentives can be more effectively distributed among various farming plans, ultimately allowing for a variety of pools for users to trade with ease.

Deposit Ratio Shift:

  • The Deposit Ratio of a ranged pool shifts depending on pool price.

More detailed information on Ranged Liquidity can be found at Crescent Docs

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