Cykura

Cykura is a market maker platform that allows liquidity providers to choose the price range where their liquidity is active. This is referred to as “concentrated liquidity”, because assets are placed by the LP at selectedd price intervals, rather than inefficiently dispersed across a 0 to ∞ price curve.   

Concentrated liquidity allows users to designate a price range in which they are willing to make markets, reaping the same market making rewards with only a fraction of the previously required capital.  

Why Concentrated Liquidity?  Good question! Typical AMMs only utilize the liquidity closest to the current trading price of a given asset pair in order to execute trades. This leaves a large share of liquidity providers’ assets spread thinly across a wide price range which go unutilized. The practical outcome in such case is that LPs earn nothing on these assets, and traders do not benefit from the idle liquidity which could be used to match their orders. Concentrated Liquidity provides a solution for putting 100% of these idle assets to work. LPs can now place 100% of their assets to work making markets precisely at the price range they think will be most beneficial for earning fees.   

But what happens if the price of a given asset pair goes out of range and there is no liquidity?

On Cykura, LPs earn fees in proportion to the share of the liquidity they control. Therefore, LPs have a strong incentive to actively manage where exactly their assets lie along the price curve, in order to maximize opportunities for earning. There is an incentive to shift assets to underserved portions of the pool, as this presents an opportunity to capture a much higher share of pool fees for the LP. Since Cykura is built on Solana, the gas costs associated with actively managing your liquidity position are negligible.