Tl;dr:

🦆 DackieSwap CLMM explanation

🦆 Guideline to add/reduce/remove liquidity on DackieSwap CLMM

DackieSwap CLMM Introduction

Today, DackieLabs is thrilled to announce a big update for Dackity! DackieSwap has transformed into a Concentrated Liquidity Market Maker (CLMM), opening the next chapter of #1 Native and Most Trusted DEX on Base.

CLMM is a feature introduced in Uniswap V3, now available on DackieSwap. CLMM enables liquidity providers (LP) to concentrate their funds within specific price ranges in the liquidity pool, providing more capital efficiency and control over their liquidity provision.

For users who don't want to dive into the technical details of CLMM or AMM, here's a simple example:

• Let's consider Alice and Bob, both having $1000 each in the ETH-USDC pair. The current ETH price is $2000.

• Alice provides liquidity to the old version of DackieSwap (AMM) with $500 in ETH and $500 in USDC. Bob, on the other hand, utilizes DackieSwap CLMM and also provides $500 in ETH and $500 in USDC. However, Bob forecasts that the ETH price will stay between $1700 and $2300 throughout the year. So, Bob sets his liquidity price range accordingly.

• At the end of the year, the ETH price is now $2100. Alice earns a liquidity fee of $50 (5% apr), while Bob earns $300 in liquidity fees (30% apr). This is because the ETH price remained within Bob's specified price range for liquidity provision, making Bob's liquidity utilization more efficient compared to Alice's approach in the old version of DackieSwap.

For technical guys, the image below provides a simple explanation of the difference between CLMM and AMM (Automated Market Maker) in liquidity providing.

As you can see, in the AMM model, liquidity is spread out from 0 to infinity, which can lead to inefficiencies in capital utilization. On the other hand, CLMM allows users to provide liquidity in a more concentrated manner, resulting in improved capital efficiency. The benefits of CLMM include:

1. Concentrated Liquidity: allowing LP to concentrate their funds within specific price ranges. This enables them to optimize capital efficiency and reduce exposure to impermanent loss.

2. Customizable Fee Tiers: the old version of DackieSwap fixed a 0.3% fee for all trades, DackieSwap CLMM allows LP to set different fee tiers for different price ranges. This provides greater flexibility in fee structures and can attract LP with diverse strategies.

3. Range Orders: enable traders to specify the price range they want to execute their trades. This feature allows for more precise and efficient trading, especially in volatile markets.

4. Capital Efficiency: With the ability to concentrate liquidity within specific price ranges, DackieSwap CLMM offers improved capital efficiency compared to the old version. LP can effectively deploy their assets and maximize returns in the areas they deem most profitable.

How to provide liquidity on DackieSwap CLMM

Alongside the significant CLMM update, DackieLabs is thrilled to introduce some fresh new UI enhancements for our beloved Dackity.

Add new liquidity

From the new homepage, scroll down and you now can access directly to Liquidity page via Add Liquidity button.

Or you can also go via Trade menu and choose Liquidity.

Now you’re on the liquidity page.

On this page, you will find a list of all the pairs that you have provided liquidity, along with the status of each pair. To provide liquidity for a new pair, simply click on Add Liquidity and you will be directed to the Liquidity-providing screen.

This screen may appear more complicated, but don't worry! I will guide you through each step, explaining everything in detail.

After selecting the Token Pair you wish to add liquidity, Box 1 allows you to specify the Fee Tier for your liquidity. If you are not the first person adding this pair, DackieSwap suggests a default Fee Tier that most people use, typically set at 0.25%. However, you have the flexibility to create your own Fee Tier with a lower or higher fee, depending on your preference. But when users perform swaps, our router will intelligently suggest the best route considering both price and fee to provide the optimal trading experience.

Box 2 displays the price range and the current amount of liquidity within this range.

Box 3 is the most important area. Here, you will choose the price range for which you wish to provide liquidity. DackieSwap offers four preset options: ±10%, ±20%, and ±50% from the current price. Additionally, there's a Full Range option, which spreads liquidity from 0 to infinity, similar to the old version of the platform (AMM).

Here are some strategies to add liquidity with CLMM:

• Stable pair: For example, USDC-USDT, the efficient price range is about ±1% to 5%.

• Non-Volatile pair: For example, ETH-USDC, the efficient price range is about ±10% to 20%.

• Volatile pair: The efficient price range is about ±30% to 50%. For some very low-cap altcoins, meme coins that can have price fluctuations of x10 to x100, we suggest the token owner add Full Range to ensure there is always liquidity available for your token at any price.

Box 4 is where you input the number of tokens you would like to provide as liquidity. Once you have configured all the settings for your liquidity, click on Add to review your liquidity details. Then, click Add again. A confirmation prompt will appear on Metamask, and once you confirm it, your liquidity will be successfully provided.

After a successful liquidity provisioning, you will find your liquidity displayed on the liquidity page, along with the LP status.

If the price moves outside your specified range to the left, your pair will be converted all to DACKIE at a rate of 2415.38 DACKIE/ETH.

Conversely, if the price moves outside your range to the right, your pair will be converted all to ETH at a rate of 3164.01 DACKIE/ETH.

This mechanism is akin to the stop-loss and take-profit concepts in trading, providing you with full control over your liquidity and ensuring you can manage your positions effectively.

Change your liquidity

In case you would like to:

1. Add more tokens to your current liquidity position.

2. Reduce your positions.

3. Exit your liquidity position to take your token back or change the price range.

Go to the Liquidity page, simply click on your current liquidity card.

And the screen will display as shown below.

• Box 1 shows Add and Remove buttons, allowing you to add more tokens or exit liquidity.

• Box 2 features a Collect button, enabling you to collect your trading fee from your LP, you can collect your fee anytime.

• Box 3 displays detailed information about your current LP position. Now, I will click on 'Add' to proceed.

Please input the number of tokens in the provided box. If you haven't approved the contract to use your tokens, click on Enable DACKIE, then proceed to click Increase and confirm the action on Metamask.

It's important to note that you have the option to add new liquidity for the same pair but with a different price range instead of increasing your current liquidity. If you wish to add a new LP, you can refer back to the Add new liquidity guidelines mentioned above.

For Remove button, the screen will display as below.

If your LP is in DackieFarms, the Farming tag will be displayed in Box 1. In Box 2, choose the percentage of LP you would like to reduce or remove, then click on Remove in Box 3 and confirm the action on Metamask, your LP will be removed. Now you have the option to open a new position with a new price range or keep your tokens in your wallet.

Conclusion

DackieSwap CLMM offers our users the best rates, with low slippage, enhanced capital efficiency, and an exceptional user experience. At DackieLabs, our goal is to provide the utmost benefits to our Dackity community.

Enjoy the #1 Native and Most Trusted DEX on Base.

Quack Quack Quack! 🦆 🦆 🦆