KyberSwap Protocols That Help Liquidity Providers (LPs) Maximize Revenue

KyberSwap has made a name for itself in the decentralized finance (DeFi) space thanks to its new offerings. Following this same path, the DeFi protocol launched another protocol called KyberSwap Elastic. It is a product that builds on the existing offerings of KyberSwap Classic (formerly known as KyberDMM) to bring a more comprehensive platform for users to access concentrated liquidity and earn according to a flexible schedule.

This new product is part of KyberSwap’s efforts to meet the needs of the ever-changing DeFi landscape and meet the needs of merchants and liquidity providers (LPs) across the market. This is the culmination of all the effort that has gone into developing the latest DEX Aggregator protocol.

KyberSwap Classic: Where It All Began

KyberSwap Classic was the first Kyber Network protocol to implement dynamic market makers. In 2021, Kyber Network introduced the world’s first-ever Dynamic Marketplace Maker (DMM). This helped shift liquidity providers/traders to an alternative to automated market makers (AMMs) in the DeFi market, which generally left traders vulnerable to high slippage, and liquidity providers were still exposed to risk high impermanent loss.

KyberSwap’s Dynamic Market Maker (DMM) protocol provides a new liquidity protocol designed for retail liquidity providers and token teams. This means that fees increase during periods of high market volatility and decrease during low market volatility to encourage trading and volume regardless of market conditions. This has enabled extremely high capital efficiency and flexibility for decentralized finance users.

In addition to its fee optimization DMM protocol, KyberSwap Classic has an Amplification Factor (AMP), which allows for higher capital efficiency compared to typical AMMs. It does this by allowing liquidity providers to set a customizable amplification factor (AMP) for a pair of tokens, which can improve slippage up to 200x better than in AMMs for stable pairs. It also went a step further with AMP liquidity which took into account the AMP factor also defined by the LPs and the inventory of tokens available in the pool. All trade volumes are then executed through the selected pool, along with all fees discounted from trading activity.

As a permissionless protocol, KyberSwap Classic users can also easily create or join liquidity pools.

KyberSwap Elastic: the future

Elastic KyberSwap is the newest protocol to bring additional benefits to the KyberSwap ecosystem. Where KyberSwap Classic allows liquidity providers to maximize revenue through the use of AMP factors and dynamic fees, KyberSwap Elastic takes it a step further with “concentrated liquidity”.

As a tick-based AMM, KyberSwap Elastic allows liquidity providers to be able to provide liquidity to an “elastic pool” using a custom price range of their choosing. LPs can choose to set a very narrow price range or a wide range that accommodates more volatile tokens and markets.

When LPs set a narrow price range, liquidity is used more efficiently as it mimics higher levels of liquidity, resulting in better slippage, volume, and profit. It works best for stable and correlated pairs such as USDC-DAI.

Setting a wider prince range helps LPs ensure that uncorrelated token pairs remain active. An example of this is a USDC-ETH pair during periods of high volatility. By fixing it at a high level, the USDC-ETH pair remains active even in the event of strong price fluctuations.

There is simply no limit to the price that LPs can set because KyberSwap Elastic has a range from 0 to infinity. These concentrated pools give LPs the flexibility to manage their capital and adjust their risk in a way that brings them rewards.

Unlike LP tokens, liquidity providers for KyberSwap Elastic will receive NFTs to represent their liquidity positions. These NFTs can be staked on applicable farms in KyberSwap liquidity mining programs for additional incentives.

Other advantages of KyberSwap Elastic are as follows;

Multi-Fee Levels:

KyberSwap Elastic has a 5-fee tier that allows LPs to select the fee tier they want, based on the correlation of the token pair they are providing liquidity for. It varies between 0.008%, 0.01%, 0.03%, 0.04% and 1%. It offers LPs a high level of flexibility that is unattainable in other decentralized exchange protocols. More fee tiers will be added in the near future.

Charges compounded automatically:

All fees earned by LPs are automatically reinvested into the pool. This way, LPs can earn more through songwriting. Users can withdraw their earned tokens at any time.

Protection against just-in-time (JIT) attacks:

KyberSwap Elastic also has enhanced security features to protect merchants and liquidity providers. The Just-in-Time (JIT) attack protection feature is an anti-sniping feature that locks all LP earnings. Tokens are then acquired based on liquidity duration, protecting them from sniping attackers who attempt to quickly introduce and withdraw liquidity to earn large trading fees without risking impermanent loss.

Other KyberSwap products for the full experience

KyberSwap has been one of the most innovative in the space, and it shows in its impressive range of products available. Not only did KyberSwap recently launch Discover, a one-of-a-kind intuitive tool for traders to discover tokens ahead of their trend, but KyberSwap also offers trading tools and features such as Dynamic Trade Routing, as well as Pro Live charts that allow users to accurately analyze charts of various tokens, etc.

Learning is also available to users on the platform in the form of tutorials and guiding prompts to take their DeFi journey. KyberSwap also has a How to DeFi 101 series to provide objective educational resources for those looking to learn more about the DeFi space.

Most notable has been the adoption of KyberSwap by other decentralized finance protocols to improve liquidity on their platform and benefit their ecosystems. Earlier in August, Polygon DeFi protocol Lido Finance partnered with KyberSwap Elastic to improve liquidity on the blockchain, offering up to $120,000 in liquidity mining rewards with the partnership.

Other notable platforms that have adopted the KyberSwap Elastic protocol to enhance their offerings are Avalanche staking platform BENQI and Avalanche cross-margin lending protocol Yeti Finance. Both protocols recently launched focused liquidity yield farming on the KyberSwap platform.

KyberSwap powers over 100 integrated projects and has facilitated over $10 billion in transactions for thousands of users since its inception. Currently deployed on 12 chains, including Ethereum, BNB Chain, Polygon, Avalanche, Fantom, Cronos, Arbitrum, Velas, Aurora, Oasis, BitTorrent, and Optimism.


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