Last updated
Last updated
Liquidity Providers (LPs) contribute stablecoins and RWA's to pools in order to facilitate swapping. In return they earn a share of fee revenue and liquidity mining rewards.
When making a deposit, you are adding two assets to the pools reserves, and in return receiving newly minted LP tokens representing your share of the pool reserves. When you withdraw liquidity, you are sending your LP token back to the pool to be burnt, and receiving a proportional share of the current reserves.
Remember, your LP tokens are not a claim on the exact tokens you deposit. They are a claim on a share of the pool reserves, which can change in proportion and value (ideally value will increase due to fees, but can decrease due to impermanent loss).
Capital Efficiency, as it pertains to AMM liquidity, is a measure of how effectively an LP's deposited liquidity is used to generate yield. This is often measured as the amount of swap volume an AMM can support for every dollar of liquidity. The more volume an AMM can attract, the more fees that are generated, and the greater the yield for LP's.
Early AMM's like UniswapV1 distributed liquidity evenly along the price curve, which meant that the majority of liquidity was never actually used. This was not very capital efficient as LPs would only earn fees on a small portion of their capital, the rest sitting idle. Subsequent AMM's such as UniswapV3 and Curve are all different attempts to best distribute liquidity where its most needed, to maximise capital efficiency.
CurveV1
around a fixed peg price
for pegged assets such as DAI/USDC
CurveV2
around an internal oracle
for non-pegged assets such as ETH/USDC
UniswapV3
within liquidity bands
users determine where to concentrate liquidity
Stabull
around an off-chain oracle
for stablcoins and RWA's
Stabull is optimised for stablecoins and RWA's by dynamically recentering liquidity around an off-chain oracle (e.g. the EUR/USD price). For an asset class where the majority of price discovery occurs off-chain this is important in ensuring LP liquidity remains active and slippage remains low. Real World Assets need Real World Pricing to trade efficiently.
To learn how to deposit liquidity into Stabull Pools see the Adding Liquidity knowledge base article.
To learn how to withdraw your liquidity, see the Remove Liquidity knowledge base article.
Deposits or withdrawals from the pool must be done in the same proportion to the current reserves of the pool. This is enforced by the contract invariant. For example, if the pool contains 100 USDC and 200 NZDS, then you may only deposit in a 1:2 ratio of USDC and NZDS, such as 1 USDC and 2 NZDS. A pool is perfectly balanced when there is a 50:50 split of each asset in reserves, using the oracle rate for conversion.
