Planet’s Pancake Concentrated Liquidity Aggregated pools will be dropping in March. This article will dive deep into how these work and what makes them special.
Our Initial Plan And The Problems With It
Initially, we intended to establish an auto-rebalancing Concentrated Liquidity (CL) pool. However, this approach was reconsidered due to several challenges identified through research, feedback from experienced Pancake users, and our own experiences writing the rebalancing smart contracts.
The primary issue with auto-rebalancing was the unexpected yield loss due to the costs associated with rebalancing, often leading to buying high and selling low, thereby not compensating for the incurred losses through trade fees. This process resulted in a decrease in the value of the liquidity provided by users, which was understandably unfavorable.
Users expressed their concerns about the lack of transparency and control in the auto-rebalancing process, desiring more flexibility in managing their investments. They particularly sought the ability to take profits when their deposits fell out of the designated price range or to reinvest in a new price range. Additionally, there was a strong preference for an auto-compounding feature to enhance the value of their initial deposits.
Our Solution
Addressing these concerns, the solution proposed is an auto-compounding Concentrated Liquidity Aggregated pool with defined price range brackets.
- Let’s say we start with BTCB-USDT in the price range 60k — 70k.
- You can Zap into this position and supply to the pool in one click on the pools page.
- As long as the price of BTCB remains between 60k and 70k, you earn rewards from Pancake.
- If the price of BTCB falls below 60k, you are left with only BTCB tokens in the pool. Whereas if the price of BTCB crosses 70k, you are left with just USDT tokens (similar to how a simple concentrated liquidity pool works)
- When the price falls out of the supplied range, you have two options:
— Withdraw your tokens(let’s say to take profits) OR
— Redeposit into the current active range (to earn trade fee and rewards) - The redeposit option will withdraw your tokens (BTCB or USDT) from the farm, convert part of them (as much as needed for supplying to the current active vault) and supply your tokens to the vault all in one step.
- Few important things to remember are
— Your swap fee rewards are getting auto-compounded
— Your Pancake rewards are also getting auto-compounded
— Over and above this, you will receive GAMMA rewards; the more GAMMA-BTCB you lock, the more GAMMA you earn!
— Both Pancake and Trade Fee Rewards are auto-compounded irrespective of your GAMMA-BTCB position.
Why we are bullish about this launch
Currently, the market lacks auto-compounding concentrated liquidity pools, a gap we’re poised to fill. Planet’s offering enhances user experience by streamlining the redeposit process with a single click. This user-centric approach could significantly boost Total Value Locked (TVL) on Planet.
Looking ahead, the success of this launch could pave the way for expanding our services to include a variety of concentrated liquidity pools from other protocols within the BNB Smart Chain ecosystem. Moreover, the adaptability of our offering holds the promise of seamless expansion to new blockchain networks, contingent on the initial reception and performance.
