Understanding Automated Market Makers (AMMs)
Automated Market Makers (AMMs) power decentralised exchanges like Camelot and Uniswap. They enable anyone with a cryptocurrency wallet to trade or provide liquidity without the need for a centralised authority. This process relies solely on predefined code, ensuring transparency and decentralisation.
What is a CLAMM?
Concentrated Liquidity Automated Market Makers (CLAMMs) are a type of AMM that allows liquidity providers (LPs) to specify a price range within which their tokens are utilised.
For example, an LP might choose to provide liquidity for ETH/USDC trades only within the price range of $1,600 to $1,900. This targeted liquidity provision enables LPs to earn fees from trades occurring within these set price bounds.
The Role of CLAMMs in Dopex
CLAMMs play a pivotal role in Dopex by transforming traditional liquidity positions into more dynamic and potentially lucrative engagements. This article series will explore how CLAMMs function and their importance in the ecosystem:
- Price range specifications and their implications.
- The structure and impact of CLAMM ticks.
- How CLAMMs relate to impermanent loss.
Subsequently, the series will delve into how CLAMMs operate similarly to options but are not compensated as such, covering:
- The analogy between CLAMM ticks and options.
- A comparison of CLAMM fees and option premiums.
Finally, we will discuss how Stryke integrates CLAMM liquidity to streamline option trading, enhancing both liquidity utilisation and reducing complexity.
Stay tuned for detailed insights into these transformative mechanisms in decentralised finance.