Concentrated Liquidity Pools on Planet

Planet
7 min readApr 29, 2023

We’re excited to announce that aggregated Fusion pools are now live on Planet, offering our users a simplified way to earn high yields. We’ve carefully selected the most lucrative Fusion pool per LP pair instead of providing all the options available on Thena, making it easier for our users to choose the right pool for them. Additionally, we’ve implemented one-click transform from any asset to Fusion pool receipt tokens, abstracting out all the complexity associated with using Fusion pools and making it easy to deposit and start earning rewards.

In this article, we’ll explain what Fusion pools are, how they work, and why we chose the type of Fusion pool to begin with. We’ll also explain how you can deposit into Fusion pools and earn additional GAMMA rewards on Planet.

What Are Fusion Pools?

Fusion pools are Thena’s concentrated liquidity pool. They operate on the same model as Uniswap V3 Pools.

For those of that are unfamiliar, concentrated liquidity pools allow users to predict ( i.e. specify) the price range that they expect swaps within the pool to take place in. As long as the tokens remain within the user’s specified price range, he earns transaction fees from the swap. The narrower the user’s price prediction, the more the user earns. For example, if the price of BnB is currently 330 BUSD. If Dylan provided liquidity with to the concentrated liquidity pool with a price range of 300 to 350 and Rachel provided liquidity with a price range of 325 to 335, Rachel would earn considerably more as transaction fees compared to Dylan.

So, why wouldn’t everyone choose to keep the range extremely narrow? It’s because, if the price were to move out side of the specified range, the concentrated liquidity pool would do two things.

  1. It would stop giving you transaction fees
  2. It would convert all your tokens to the cheaper of the two tokens.

For example, if the price of BNB is currently 330 BUSD and your range was 300 to 320, once the price crossed 320, all your BNB tokens were sold for BUSD, so you only have 320 BUSD tokens against your position. This could leave you with a considerable impertinent loss if the price doesn’t swing back. Also, as long as the price stays outside the range you mentioned, you earn no transaction fees for supplying your liquidity.

Reading all this, you’re probably feeling this is way too complicated and needs a lot of managing, right? That’s why Thena partnered with Gamma and Algebra to simplify things for you.

Thena’s Partnership with Gamma and Algebra

In collaboration with Gamma and Algebra, Thena manages the your liquidity in the concentrated liquidity pools. What this means is, you needn’t keep checking if the current price is out of your specified range and reposition your range. It is managed and periodically rebalanced for you so you can keep earning yields without having to worry about adjusting your price ranges time and again.

Here’s a simplified explanation of how this partnership works.

  • When you provide liquidity on Thena, the liquidity is supplied to a Hypervisor (which is a liquidity management contract managed by Gamma) which then supplies the tokens to Algebra’s Concentrated Liquidity Pools.
  • Since the Hypervisor supplies the tokens to Algebra’s pools, the Hypervisor can also rebalance the position, i.e., change the price range of its position in the Algebra pool, thus earning rewards all the time. The Hypervisor is checked by Gamma every few minutes to see if it needs to be rebalanced, and whenever the price hits their reset price, the position is rebalanced.
  • You are given a receipt Hypervisor token to signify your share of the tokens in the Thena pool, which you can use to redeem your tokens anytime.

Note: Gamma mentioned here refers to then protocol gamma.xyz and not Planet’s utility token GAMMA.

How You Receive your Rewards

This is in contrast to Uniswap V2 pools, where the transaction fees accrued came directly to you as an increase in the value of your LP Token, the Thena Fusion pools provide you the entire APY in the form of Thena. Transaction fees generated from the fusion pools are used as bribes on Thena and liquidity providers earn yields entirely as Thena tokens.

When you submit your tokens to Planet, the Thena rewards are sold by Planet’s strategy and converted to GAMMA. After charging a performance fee, these rewards are given to you along with additional GAMMA rewards to help you earn even more. As always, the more GAMMA you hold in the infinity vault, the more you earn.

Narrow Pools vs Wide Pools

If you’ve try to supply liquidity to fusion pools on Thena, you might have more than one pool for some pair of tokens. One termed Narrow and another termed Wide.

  1. Narrow Range Pools: The narrow range pool strategy focuses on a tighter price range between two assets. This strategy works well for assets with high and positive price correlation as it concentrates the price range where most trading activity occurs, thus maximising the fees earned. The caveat here is that users would face impermanent loss in highly volatile environments, where prices change and move out of range faster than the few minutes by when Gamma checks and rebalances the pool.
  2. Wide Range Pools: The wide range pool strategy involves spreading liquidity over a broad price range between two assets. Since the range is broad, the transaction fee earned would be lesser than that in a narrow pool. However, for assets with low price correlation and significant price fluctuations, such as following a key release or unexpected news, wide pools would not suffer the impermanent loss the way narrow pools do.

To begin with, Planet will be aggregating only Narrow pools, as we believe these will be most profitable to our users. Here’s Why.

  • Fusion pools are new to our users, and we want to simplify the choices, providing only the most lucrative option.
  • For the Fusion pools (corresponding to the V1 Thena pools we’ve aggregated that are receiving negligible APY from Thena) that we are starting with, the Narrow Pools have a much higher APY than the wider pools.
  • Narrow pools work as both hedge against upside and downside, and the volatility that is present in the market currently is more than sufficiently being compensated for by the increased fees generated by the narrow pools.
  • In most scenarios, as the rebalancing of your LP tokens happens within minutes, the impertinent loss won’t stick and you start earning rewards soon after your position is out of range.

As always, AQUA holders can put up proposals to decide to add the pools of their choice, including wide pools, through our governance.

New Aggregated Fusion Pools

These are the pools we are launching to begin with

  1. BTCB-BNB
  2. ETH-BNB
  3. USDT-BNB

Over the coming days and weeks we will be adding to this list, based on the pools our community wishes to see.

How To Supply To Thena Fusion Pools on Planet

Step 1: Get LP Tokens

  • Select the token you’d like to use to swap into LP tokens and the amount of token and click ‘Approve’
  • Approve the contract to access your token
  • Click ‘Create LP’
  • Approve the transform transaction. Planet’s Zap Contract will swap your input token for both the underlying tokens of the LP Pair you selected, supply those tokens to Thena and provide you with the Hypervisor tokens returned by Thena

Step 2: Deposit Hypervisor Tokens into Planet Farm

  • Now, on the Pool for which you created LP Tokens, click ‘Approve’
  • Click “Use default”, to ensure Approval is asked only once, and Approve the transaction
Click “Use default” to ensure Approval is needed only once
  • Enter the Hypervisor Tokens you wish to stake or click ‘MAX’ to select all your Hypervisor Tokens
  • Click ‘Deposit’ and approve the transaction

Migrating from old Thena pools

If you’re migrating from an one of the old Thena Pools, click “Finished” on the pools page, scroll down to your old Thena pool, click ‘Withdraw’ and approve the transactions to remove your liquidity from planet and then click ‘Convert LP’ and select your destination token to convert your tokens to the token of your choice. Thereafter, you can follow the deposit steps shared above to deposit tokens into the new Fusion pools.

There will be no deposit fee of 0.1% for the first 48 hours so that you can migrate without incurring additional cost.

In case of any questions, do reach out to us on Telegram. We’re a close knit community and one of the members or admins is sure to help you out!

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Planet

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