RAMSES
  • INTRODUCTION TO RAMSES
    • ๐Ÿ”†What is RAMSES?
      • ๐Ÿš€Why Arbitrum? ๐Ÿ’™๐Ÿงก
    • ๐Ÿซ‚Our Partners
    • โ˜ฏ๏ธve(3,3) Fundamentals
      • Dilution Protection (Rebase)
      • veRAM (veNFT)
        • ๐Ÿ’ฐveRAM Revenue Distribution Schedule
        • ๐ŸคThe RAMSES Bazaar (PaintSwap)
    • ๐Ÿ”ฎDEX Functionalities
      • Swaps
      • Voting
      • Bribing
      • Vesting (veNFT Management)
      • LP Staking (Legacy)
    • ๐ŸŽ“RAMSES Analytics
    • โš”๏ธThe Competitive Edge
      • Expert Risk Management
      • User Focused, Not Competitor Focused
      • Novel Changes & Codebase Restructuring
  • RAMSES CL (V2)
    • ๐Ÿ—ฏ๏ธOverall Changelog
    • ๐Ÿค”Concentrated Liquidity
      • ๐Ÿ”ขDefault Fee Tiers / Tickspacing
      • ๐ŸฆญFee Distribution
      • ๐Ÿ“’Improvements From UniswapV3
    • ๐Ÿ†CL Gauges
      • ๐Ÿ’ฅCL Boosting [DEPRECATED]
    • ๐ŸCompetitive Farming
    • ๐Ÿ“œBUSL-1.1 License
      • ๐Ÿ”’Protected Contracts
  • RAMSES VIII (V3) [WIP]
    • ๐Ÿ‘‘The Next Iteration For The Kingdom
    • ๐Ÿ›ฃ๏ธThe Road Ahead
    • 1๏ธโƒฃStage I : Initial Changes
    • 2๏ธโƒฃStage II : Full Migration
  • RAM Tokenomics
    • ๐Ÿ“ŠRAM Token Distribution
    • ๐Ÿ“ˆEmissions Schedule
    • โŒxRAM
      • How is xRAM obtained?
      • How is xRAM used?
      • โ˜ธ๏ธxRAM "Flywheel"
    • ๐ŸŒ€Dilution Protection (3,3) Rebases
    • ๐Ÿ’งRAM LGE - Liquidity Generation Event
      • Price Determination
  • ๐ŸงธRAMSES Services
    • ๐Ÿ›ซLaunchpad & LGE
    • ๐Ÿ†˜Solidly Model Vulnerability Support
    • ๐Ÿ”„ve(3,3) Advisory
      • ๐Ÿง Projects Supported (Case Studies)
  • Resources
    • ๐Ÿ“„Deployed Contract Addresses
    • ๐Ÿ“ฑdApp and Socials
    • ๐Ÿ“ธRAMSES Media Kit
    • ๐ŸŒ‰Bridging To Arbitrum One
    • ๐Ÿ“ƒWhitelisting Process
  • Security and Legal Considerations
    • ๐Ÿ–‹๏ธFormal Audits
    • ๐Ÿ›Fixed Solidly Vulnerabilities
    • ๐Ÿ› ๏ธWhy Proxy Contracts?
    • ๐Ÿ”Contract Timelock
    • ๐Ÿ˜ŽInherited Security
    • โš–๏ธRisks and Legal Disclosures
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  1. RAMSES CL (V2)

Concentrated Liquidity

Last updated 1 year ago

Concentrated Liquidity is, currently, the most efficient and profitable method of market making that on-chain decentralized exchanges have access to. This was popularized and took the space by storm when Uniswap released their UniV3 model. To get an idea of what UniV3 offers we can compare it to a more centralized, and well-known, liquidity scheme: A CEX Order Book.

As you can easily see in the CEX Order Book diagram above, the bid (buys) and asks(sells) are clearly shown, and the depth at which a market order would impact the median price is visually discernable. Interesting enough, the concentrated liquidity model, is represented visually as an inverse histogram of the order book. (Flip the photo upside down and invert the colors).

The blue area shaded in represents the liquidity ranges summated between all users within the LP pool [within the same fee-tier, more on this later].

To make it very clear the efficacy differential between x*y=k (uniV2) and UniV3's orderbook-style AMM-- it needs to be explained that typical LP positions operate on a (0,โˆž) range.

This means that each individual user in the pool is subject to providing liquidity in every possible positive real-number. Since every trade has to consider this when the swapping algorithms are ran, $100,000 of liquidity spread from 0 to โˆž is exponentially less efficient than, say, one with a defined range of ($1,000-$1,100). With the latter example of the $1,000-$1,100 liquidity range, it is calculatable that the same $100,000 of liquidity is now concentrated in a $100 price range, providing an EXTREMELY efficient swapping experience. Providing the lowest slippage currently feasible within the DeFi space.


๐Ÿค”
A typical CEX Order Book Market
Concentrated Liquidity Price Range Module
Liquidity in a CL position version a RAMSES V1 position