Liquidity Provision
This section explains the fundamental ideas behind liquidity provision in Coral Finance
General Introduction
LPs supply liquidity to a corToken pool on Coral Finance for traders to swap against. Each corToken pool consists of two tokens. In most cases where an LP supplies quantities of both tokens, Coral Finance allows users to provide only one token (single-sided liquidity).
CorLPs provide corTokens via single-sided liquidity provision into the pool in order to gain the leveraged returns, and the DPs provide the other asset via single-sided liquidity provision to receive rewards.
Coral Finance orchestrates the provisioning of liquidity for each corToken pool by coordinating actions between corLiquidity Providers (corLPs) and Deposit Providers (DPs) - we call this El Nino Rebalancing.
The price ranges of corToken are divided into a series of bins in a pool. At any one time, only one bin in a pool is active as the prices in the pool are a reflection of the ratio between the two tokens in that pool. As the ratio changes, the price moves to a new bin. An LP's liquidity during a specific Tide is distributed and kept to the right (DPs' liquidity) or left (corLPs' liquidity) of current active bin - we call this Adhering Liquidity Deployment. LPs only collect fees when they own liquidity in the currently active bin.
The fees for LPs are based on their pro rata share of the current active bin and they could collect fees any time when traders swap tokens from that bin. Traders choose pools and swap corToken on their own and the AMM intelligently routes their swap to the pool which will give them the best value at any given moment.
Tide of Liquidity and Rewards
Liquidity: Your liquidity is not instantaneously added into the pool, but after the next Tide starts. In other words, you will become an LP until the next Tide if you add liquidity in the current Tide.
Rewards: Your LP rewards is not based on Tide, so you are able to claim it on daily basis.
Impermanent Loss
Individual LPs usually view impermanent loss as the difference in total value of the assets deployed after shifting of the ratio of the pool assets due to a change in their exchange rate compared to simply holding both assets. Providing liquidity on Coral Finance is not without risk.
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