IceCreamSwap Dex to support V3 Concentrated liquidity Model



The DeFi world is rapidly evolving, and IceCreamSwap Dex is staying ahead of the curve. We are excited to announce our support for the new Uniswap V3 update, which will give liquidity providers more power and flexibility. We will be among the top Dexes like Uniswap, Balancer, Trader Joe, 1inch, ParaSwap and Ramses to offer this unique service. In this article, we will break down the concept of the Uniswap V3 update, which is the concentrated liquidity approach for decentralized exchanges (Dexes).

Concentrated liquidity in V3 is a feature that allows liquidity providers to concentrate their liquidity within a custom price range. This is way in contrast to well-known Uniswap V2, where liquidity providers were required to distribute their liquidity across the entire price range from 0 to infinity.

An illustration of how Concentrated Liquidity work:

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Lets say User A and User B both want to provide liquidity in an X/Y pool on IceCreamSwap v3 update. They each have $1000. The current price of X token is 1$ and Y is 2$.

User B decides to deploy her capital across the entire price range (as she would have in V2). She deposits 500 of X and 250 of Y token (worth a total of $1000).

User A instead creates a concentrated position, depositing only within the price range from 0.5$ to 2$ of X token. User B deposits 100 of X token and 50 of Y token, worth a total of about $200 cumulatively. He keeps the other $800 to himself, investing it however he prefers.

Note: the current X token price is 1$ while Y token price is 2$.

While User A has put down 5x as much capital as User B, they earn the same amount of fees, as long as the X/Y price stays within the 0.5 to 2$ range.

Benefits of Concentrated Liquidity to users:

IceCreamSwap supporting the concentrate liquidity has a number of benefits. It includes the following:

First, it will allow liquidity providers to earn higher fees. This is because when liquidity is concentrated in a narrower price range, it is more likely to be used, therefore the liquidity supplied by the users and liquidity providers earn fees on every trade that is executed using their liquidity.

Reduced slippage, concentrated liquidity can help to reduce slippage. When there is a lot of liquidity available at a particular price, traders are less likely to experience slippage when they place a trade.

Improved market efficiency, by ensuring that adequate liquidity are concentrated around the current token price, concentrated liquidity helps to improve the overall efficiency of the market. In essence concentrating liquidity in the areas where it is most needed, concentrated liquidity can help to reduce the overall spread and make it easier for traders to find the best prices.

In Summary, Concentrated liquidity is a new way to provide liquidity on decentralized finance (DeFi) platforms like IceCreamSwap Dex, it optimizes liquidity for specific price ranges. Liquidity providers can concentrate their funds into specific price ranges or regions within an asset’s trading pair. IceCreamSwap Dex will be among the top Dexes to offer concentrated liquidity, and it is expected to be a significant improvement for the overall experience of its users.

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