Competitive Farming
Cleopatra's CL introduces the concept of competitive farming to ve(3,3)
Last updated
Cleopatra's CL introduces the concept of competitive farming to ve(3,3)
Last updated
With concentrated liquidity, there are new dynamics at play when providing liquidity and yield farming. Cleopatra introduces the concept of competitive farming to the ve(3,3) model, which promotes the most optimized positions achievable by users.
What is Competitive Farming? Competitive farming can be simply explained as a method of rewarding LP providers in which the most 'competitive' and productive liquidity is rewarded the highest. In concentrated liquidity models, users/actors choose their liquidity ranges which they want to provide LP to. This opens the possibility for a user to choose any amount of tick ranges between 0 and infinity.
What are the benefits? The more optimized a user's range is, the higher rewards they earn. This naturally creates an alignment of liquidity provisioning with the growth of the Cleopatra. The ultimate goal of incentivizing liquidity is that you are driving more favorable swap routing towards pairs, for aggregators to pick up on. Concentrated liquidity is multiple times more efficient in bringing volume to a pair with regards to the dollar amount of liquidity provided. Higher fees are achieved as a result of more swap volume directed towards Cleopatra CL pairs. Thus veCLEO holders are able to earn more real-yield in the underlying tokens of the pairs.
Visual Representation of Competitive Farming: In the figure below, the current price-tick of the pair is within the red area. This red area is the currently used swap-tick for trades to route through. Liquidity positions that have the highest concentration around this red line will earn the most rewards while it stays there. Whenever a large enough swap happens, this price-tick will move to either direction, changing the rewards distribution factors.
