Concentrated Liquidity (V3 Pools)
This feature is currently available for EVMOS. We are looking forward to rolling it out across more chains in 2023.

How to Provide Liquidity on Elixir

In Elixir, liquidity providers can concentrate their capital within custom price ranges, offering increased liquidity at preferred prices.
Unlike its predecessor, which required users to provide liquidity across the entire price curve from 0 to infinity, Elixir allows liquidity providers (LPs) to concentrate capital in the price range they believe will yield the highest return.This guide will outline the steps to provide liquidity using the Pangolin app.
  1. 1.
    Select a pair:
    First, choose the pair of tokens you wish to provide as liquidity. Any pair of ERC-20 tokens is valid, but each pair has distinct characteristics. Consider factors such as Total Value Locked (TVL), trading volume, and the risk of token prices diverging in the future. You can analyze data about popular token pairs on Pangolin Info.
  2. 2.
    Review Fee Tier:
    After selecting a token pair, choose the appropriate fee tier. Each token pair offers three fee tiers:
    • 0.05% fee tier: Best for stable pairs - Ideal for token pairs trading at a fixed or highly correlated rate, such as stablecoin-stablecoin pairs (e.g. DAI-USDC). LPs take on minimal price risk in these pools, and traders expect to pay minimal fees.
    • 0.3% fee tier: Best for most pairs - Suitable for less correlated token pairs, such as ETH-DAI, which are subject to significant price movements. This higher fee compensates LPs for the greater price risk relative to stablecoin LPs.
    • 1.0% fee tier: Best for exotic pairs - Designed for exotic assets, where LPs take on extreme price risk (e.g. ETH-GTC). Relevant assets are particularly subject to monotonic price movements.
    The app will auto-select the fee tier with the most liquidity, as it is a good heuristic. In most cases, LPs will align around one fee tier for a pair. In the example above, we see 82% of all ETH/USDC liquidity is provided in the 0.3% tier, making it a good choice for prospective ETH/USDC LPs. If you're new to providing liquidity, we recommend using the auto-selected fee tier. However, advanced LP strategies may find it worthwhile to provide liquidity in other fee tiers. Note: LPs who choose the non-consensus fee tier might be running a sophisticated strategy to offset certain risks. Please conduct your research and proceed cautiously when considering other fee tiers.
  3. 3.
    Set Price Range:
    Choose a price range in which to provide liquidity. Consider the degree to which you think prices will move over the course of your position's lifetime, your willingness to actively manage the position as the market evolves, and the economics of transactions required to actively manage a position. If the price moves outside your specified range, your position will be concentrated in one of the two assets and will not earn trading fees until the price returns to their range.See the visualizations in this blog post to observe how your assets are affected when the market price moves out of range. Note: Your price will snap to the nearest tick. Don't worry if you're unable to type in a nice round number! This is expected because of how ticks work in Elixir. Instead of selecting a price range, you can provide liquidity across the Full Range like in the previous version by clicking the Full Range button. However, please note your rate of return will be significantly lower than a similar position with a narrower price range.
  4. 4.
    Deposit Amounts: With your pair, fee tier, and price range selected, decide how much capital to contribute to this position. Enter a value in one of the "Deposit Amounts" boxes, and the other box will automatically populate the corresponding amount. The ratio of these two fields is based on the position of your price range around the market price. If your price range skews more toward one side of the market price, you will provide more of that asset. This can be acceptable -- it is not necessary to target a 50/50 ratio, although some strategies may choose that ratio. You can adjust your ratio by sliding the price range left-right along the chart or dragging the min or max price boundary.The deposit amount that you typed in will remain fixed, while the second asset amount will adjust to the new ratio based on your new price range. If you select a price range that does not include the current market price, you'll only need to provide a single asset instead of both.
  5. 5.
    Approve and Add: First, you may need to approve the Elixir router contract to spend tokens on your behalf (This is only necessary the first time you provide liquidity with a token). Once the approval transaction has been confirmed, press preview, review the transaction details, and then click "Add" to trigger the transaction in your wallet.
​✅Congratulations! Once the transaction confirms, your assets are now providing liquidity to swaps on Pangolin, and your position is earning fees. You can monitor and manage your position on the Pool page.