Concentrated Liquidity
Blaze, powered by innovative technology, features advanced concentrated liquidity pools. These pools offer users the ability to specify price ranges for their liquidity, activating earnings of swap fees only when asset prices are within these ranges. Blaze’s concentrated liquidity outperforms traditional AMMs by offering limit orders, dynamic and custom fees, and unique farming opportunities.
In concentrated liquidity, users can concentrate their capital within selected price brackets like $1900 - $2100 for ETH/USDC pairs, rather than the entire price range. This targeted approach ensures liquidity is utilized effectively, leading to higher fee earnings when the asset price is within the specified range. While users won’t earn fees outside their chosen bracket, they benefit from more efficient capital use and potentially higher returns when within range.
Platform Benefits
Market Depth and Price Stability
- Concentrated liquidity ensures tighter spreads and better price execution, reducing slippage costs
- Absorbs large orders without significant price impacts, offering predictable trading outcomes
Platform Growth
- Its efficiency makes Blaze a preferred platform for aggregators, increasing trade volume
- Improved market performance generates more organic fees for veBLAZE voters
Key Features and Benefits
Efficiency Improvements
- Up to 10x greater capital efficiency compared to traditional models
- Reduced slippage and better trade execution
- LPs can tailor their risk exposure and return potential
Implementation Challenges
- Requires active management and timely adjustments
- May face increased impermanent loss outside price range with volatile assets
- Complex nature can be challenging for newcomers
The Traditional Model vs Concentrated Liquidity
In the conventional AMM model, users contribute liquidity and receive tokens along with trading fees. However, the boundless price range often leaves much liquidity untapped. To combat this, DEXs require copious liquidity in these pools to address subpar price execution.
To address challenges like management complexity and impermanent loss, Blaze integrates active liquidity management solutions. These services play a crucial role in optimizing liquidity positions, ensuring they remain within the most effective ranges for fee maximization.