In the #DeFi  universe, efficiency and maximization of returns are essential for liquidity providers (LPs). JulSwap V2 introduces a new model with Concentrated Liquidity, allowing LPs to have more control over their assets and enhance their returns.

Let’s take the DAI/USDC pool on JulSwap V2 as an example. Since both coins are stablecoins pegged to the dollar, most transactions occur between $0.99 and $1.01. Traditionally, liquidity is evenly distributed across the price curve x*y=k, covering everything from near-zero values to infinity. This means a large portion of the liquidity remains inactive, without generating rewards proportional to the risk of impermanent loss.

The difference in JulSwap V2 lies in the customization of allocation. Instead of providing liquidity indiscriminately, LPs choose a specific price range within which they want to operate. If the price of the asset stays within this range, they collect swap fees. Otherwise, their funds remain in the pool but do not generate yields.

To illustrate, imagine an LP who adds 1 $ETH and 2,000 DAI to the ETH/DAI pool and sets a range between $1,950 and $2,050. Whenever a transaction occurs within this range, they receive the fees. If the price of $ETH moves outside this range, they do not accumulate rewards until the market returns to their liquidity zone.

This approach improves capital efficiency, reduces slippage for #traders, and increases returns for LPs. With the growing adoption of Concentrated Liquidity on JulSwap V2, the protocol solidifies its position in the DeFi space, offering a smarter and more profitable model for its users.
#DeFi