Concentrated LP

Concentrated Liquidity for Enhanced Pricing

One of the core features of Taya is the ability to concentrate liquidity within a specified price range. Here's how it works:

• User-Defined Price Ranges: In traditional AMMs, liquidity providers are essentially willing to trade their assets at any price, regardless of how extreme it may be. With Taya's Concentrated Liquidity Pools, liquidity providers have the freedom to specify the price range within which they are comfortable trading.

• Improved Capital Efficiency: By concentrating their liquidity within a defined price bracket, liquidity providers can optimize their capital allocation. They no longer need to lock up excessive capital to cover unrealistic price scenarios. This means that their capital can be used more efficiently elsewhere, potentially earning additional yield.

• Enhanced Pricing: Swappers benefit from this approach as well. When they initiate trades on Tayaswap, they interact with aggregated liquidity positions. This aggregation allows swappers to access better pricing because liquidity providers can leverage up within a specific price range. This results in a more competitive and efficient trading environment compared to traditional AMMs.

Tayaswap's implementation of Concentrated Liquidity Pools revolves around the idea of allowing liquidity providers to specify their desired price ranges. Here's the logic behind it:

// Simplified code for specifying liquidity within a price range
function provideLiquidity(
    address tokenA,
    address tokenB,
    uint256 minPrice,
    uint256 maxPrice,
    uint256 liquidityAmount
) external {
    // Verify that the provided price range is valid
    require(minPrice < maxPrice, "Invalid price range");
    
    // Add liquidity within the specified price range
    // (Actual code will involve complex calculations and asset transfers)
    liquidityPool[tokenA][tokenB].addLiquidity(msg.sender, minPrice, maxPrice, liquidityAmount);
    
    // Emit an event or update relevant data structures
    emit LiquidityProvided(msg.sender, tokenA, tokenB, minPrice, maxPrice, liquidityAmount);
}

In this simplified code snippet, liquidity providers use the provideLiquidity function to specify their desired price range by defining minPrice and maxPrice. The contract ensures that the provided price range is valid. Liquidity is then added within this specified price bracket. In a real implementation, there would be more complex calculations and asset management.