Automated Liquidity Management
Last updated
Last updated
Historically, providing liquidity on DEX was relatively straightforward, but Concentrated Liquidity AMM (CLAMM) introduced new complexities that make the process significantly more challenging.
CLAMM allows LPs to allocate their capital within specific price ranges. This innovation offers the potential for higher yields by enabling LPs to focus their resources more effectively. However, it also comes with increased complexity. If the market price moves outside the selected range, the liquidity becomes inactive, ceasing to earn fees. This situation not only limits earnings but can also result in missed opportunities and potential losses.
In contrast to CFMM, where liquidity was automatically distributed across all price points, CLAMM demands active position management. LPs must frequently monitor the market and adjust their positions to ensure their liquidity remains within active price ranges. This process involves setting and modifying ranges in response to market fluctuations, which requires both time and a solid understanding of market dynamics.
SwapX has partnered with ICHI Labs to improve liquidity management on the Sonic blockchain. By integrating ICHI’s cutting-edge vault technology and automated liquidity strategies, the collaboration aims to optimize the DeFi experience for users.
ICHI, a pioneer in concentrated liquidity management, empowers token holders with sophisticated algorithmic strategies, making liquidity provision seamless and efficient. By focusing on concentrated liquidity, ICHI reduces costs, ensures price stability, enhances yields, and fosters sustainable growth.
At the core of this partnership is ICHI’s Yield IQ Strategy, which enables liquidity providers to grow their target tokens through automated rebalancing. Users can deposit a single token into the vault, which is actively managed to earn SWPx rewards distributed via weekly emissions. This innovative approach maximizes asset accumulation while ensuring consistent returns through dynamic market engagement.
When depositing via ICHI, users should consider two key factors:
Earnings Potential: the vault’s APR. A higher APR means greater SWPx emissions, maximizing earning potential.
Deposit Token Preference: choose which token to deposit based on the one you value more or wish to prioritize protecting. The vault provides stronger protection for the deposited asset.
For example, in the wS/USDC pool, if you expect wS to perform better, deposit it to capture potential growth. For a more cautious approach, deposit USDC to preserve value. Or if both tokens carry are volatile, choose the one you believe has the most potential. This ensures your deposits align with your goals and risk tolerance.
The platform offers unparalleled flexibility, allowing users to withdraw their deposits and earnings anytime by exchanging LP tokens for their share of the vault’s assets. With security, transparency, and permissionless access guaranteed by ICHI’s self-executing smart contracts, this partnership is set to deliver a superior DeFi experience.
