Orca launches MEDIA/USDC Whirlpool on Solana
Orca is a decentralized exchange on the Solana blockchain where you can exchange tokens cheaply, quickly, and confidently. Additionally, you can provide liquidity to regular and concentrated liquidity pools called “Whirlpools” to earn trading fees and token emissions.
Everything you need to know about Whirlpools: how to maximize rewards in simple steps
Whirlpools are Orca’s brand-new concentrated liquidity pools. These pools allow LPs to concentrate their liquidity around specific price ranges, unlocking significant gains in capital efficiency for liquidity providers and better prices for swaps.
What are the main differences with regular pools?
Unlike standard pools, liquidity providers in Whirlpools will compete for trading fees and token emissions, which are divided among liquidity providers according to the parameters of their deposits.
Due to the structure of Concentrated Liquidity and Leverage, users who set a tighter price range around the current token price will receive a higher share of fees and incentives. On the other hand, they are more vulnerable to Divergence Loss (also known as Impermanent Loss or IL).
How do price ranges work?
Traditional pools have liquidity providers that provide liquidity across the entire possible price for a token, from zero to infinity. Users can choose the upper and lower limit for their liquidity when participating in a Whirlpool.
It is worth noting the limitations are not arbitrary: users must choose between a set of evenly distributed discrete ticks.
What tokens represent my deposit?
In a standard AMM pool, Liquidity provider (LP) tokens represent how much of the total liquidity of a pool is owned. As users deposit liquidity, their original tokens go into the pool, and they mint LP tokens in an equivalent amount, increasing both the liquidity in the pool and the total supply of LP tokens.
When withdrawing liquidity, they burn their LP tokens and receive their original tokens back according to the pool balance (which may go up or down depending on the relative price of tokens), decreasing both the liquidity in the pool and the total supply of LP tokens.
As all liquidity in standard pools has the same zero-to-infinite range and no multiplier, all LP tokens are the same, which makes them fungible. In Whirlpools, each liquidity provider decides the range and amount of liquidity deposited into the pool, making each LP token unique and non-fungible.
For more information about Whirlpools, check out the FAQ.
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