The DeFi landscape is rapidly evolving, and with it, the need for more efficient, capital-optimized solutions. Most DEXs on TON Blockchain still rely on traditional AMM v2 models, which are now outdated and inefficient.
Enter TONCO, the first DEX on TON Blockchain to implement a Concentrated Liquidity Automated Market Maker (CLAMM) model, which promises to revolutionize liquidity provision and trading on TON.
In this article, we’ll explore how CLAMM works, how it improves upon traditional AMMs, and why it’s set to revolutionize DeFi on TON.
The Concentrated Liquidity Automated Market Maker (CLAMM) is an innovative liquidity model that enables liquidity providers (LPs) to focus their assets within specific price ranges instead of distributing them evenly across the entire spectrum. Unlike traditional AMM v2 models, which spread liquidity thinly across all price points, CLAMM allows LPs to allocate their liquidity in the ranges where trading activity is most likely to occur. This results in significantly higher capital efficiency and deeper liquidity at the most critical price points.
On TONCO, liquidity pools function similarly to those on other leading DEXs, such as Uniswap V3, or THENA, Camelot and QuickSwap, powered by Algebra, where prices are calculated based on supply and demand principles. However, the difference lies in how liquidity is distributed within the pool, which is where CLAMM’s concentrated liquidity approach shines.
In a CLAMM-based system, LPs choose price bands—known as ticks—to concentrate their liquidity, ensuring that their capital is actively working in the areas where it is most effective. As trades happen within these price ranges, LPs earn a share of the trading fees based on the liquidity they’ve provided in that specific range.
This targeted approach not only maximizes the use of capital but also minimizes slippage for traders, creating a better trading experience. At its core, CLAMM transforms how liquidity is managed on decentralized exchanges, benefiting both LPs and traders by making the liquidity provision process far more efficient and profitable.
CLAMM technology benefits everyone involved in the ecosystem:
Higher Profits for LPs: By focusing liquidity in active trading ranges, LPs can generate higher returns on their capital. More of their liquidity is utilized for swaps, and fees are earned only when trades happen within the selected price range, maximizing the efficiency of their investments.
Lower Slippage for Traders: With concentrated liquidity in key price ranges, traders enjoy deeper liquidity, allowing them to execute trades with minimal slippage. This leads to a smoother and more efficient trading experience, especially during high-volume periods.
Better Liquidity Depth for Projects: Projects looking to add liquidity to the DEX benefit from CLAMM’s capital efficiency, meaning deeper liquidity can be achieved with less capital. Instead of spreading liquidity thinly as in v2 AMMs, projects can concentrate liquidity in the most relevant price ranges.
In traditional v2 AMMs, liquidity is spread evenly across all price points, from zero to infinity, based on the invariant function x * y = k. This approach results in a significant portion of liquidity being wasted, as most trading activity happens within a narrow price range. As a result, LPs often provide liquidity in areas where no trades are taking place, leading to inefficient capital use and lower yields, which negatively impact their returns.
CLAMM fundamentally changes this by giving LPs control over where their liquidity is deployed. LPs can choose specific price ranges where they expect the most trading activity to occur, ensuring that their capital is concentrated where it’s needed most. This targeted approach boosts potential rewards, as liquidity is more likely to be used for swaps within the chosen range. LPs can even open multiple positions to fine-tune their strategy and maximize their profits.
One of the standout features of TONCO’s CLAMM model is customizable tickspacing, which refers to the precision with which price ranges can be defined. LPs can adjust tickspacing based on the unique needs of different liquidity pools, such as tighter ranges for stablecoin pairs. This flexibility allows for more accurate liquidity provision, helping LPs fine-tune their strategies to adapt to changing market conditions, further improving capital efficiency.
CLAMM technology offers significant efficiency improvements over traditional AMMs. Here are some key advantages:
Increased Capital Efficiency: With CLAMM, LPs can achieve up to 95% capital efficiency compared to v2 DEXes by concentrating liquidity in the most active price ranges. This allows them to earn higher returns while risking less capital.
Dynamic Fees: TONCO’s CLAMM model also includes dynamic fee structures, which adjust based on market conditions like volatility, pool volume, and trading activity. This ensures that LPs are compensated appropriately for the risks they take. Unlike Uniswap, which offers multiple pools with varying fees, TONCO simplifies the process by offering a single pool with dynamic fees that adapt in real time based on key factors.
Built-in Farming: TONCO integrates farming, enabling LPs to earn rewards directly through the platform. This feature incentivizes liquidity provision and enhances the overall health of the DeFi ecosystem by keeping liquidity within the DEX and encouraging long-term participation.
The introduction of CLAMM technology through TONCO marks a significant advancement for TON Blockchain. As the blockchain continues to evolve, the demand for more efficient and profitable ways to manage liquidity grows. Traditional v2 AMMs no longer meet the needs of the market, which increasingly requires deeper liquidity, lower slippage, and better capital efficiency.
TONCO addresses these challenges by filling a critical gap in the DeFi infrastructure on TON. By providing a modern, highly efficient DEX, TONCO caters to the needs of both liquidity providers and traders, offering them a superior way to interact with the market.
TONCO’s implementation of CLAMM technology represents a significant leap forward for decentralized exchanges on TON Blockchain. By enabling concentrated liquidity, dynamic fee structures, and built-in farming, TONCO sets a new benchmark for efficiency and profitability. Whether you’re an LP looking to maximize returns, a trader seeking lower slippage, or a project in need of deeper liquidity, TONCO’s CLAMM model offers a solution that benefits everyone.
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Maximize capital efficiency, reduce slippage, and earn more with TONCO concentrated liquidity on TON Blockchain.